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 1 month ago

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