Question
In: Finance
Net present value: Emporia Mills is evaluating two heating systems. Projects are independent. Costs and projected...
Net present value: Emporia Mills is evaluating two heating systems. Projects are independent. Costs and projected energy savings are given in the following table.
| Year | System 100 | System 200 |
|---|---|---|
| 0 | $-1,435,000 | $-1,489,671 |
| 1 | $328,286 | $763,950 |
| 2 | $604,070 | $619,973 |
| 3 | $668,921 | $678,783 |
| 4 | $709,713 | $471,023 |
The company uses 10.73 percent to discount such project cash flows. The NPV of System 100 is $__________.
the NPV of System 200 is $__________, and Emporia should choose System 200 or neither system or System 100 or both systems.
Solutions
Expert Solution
Solution :
The NPV of System 100 is $ 318,927.29.
= $ 318,927 ( when rounded off to the nearest whole number )
The NPV of System 200 is $ 519,165.88
= $ 519,166 ( when rounded off to the nearest whole number )
Since both the projects are Independent and the NPV of each of the projects is positive, Emporia should choose both systems / projects.
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.
jeff jeffy answered 4 months agoRelated Solutions
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