For the mutually exclusive project alternatives shown below, determine which one (s) should be selected.Alternative...

For the mutually exclusive project alternatives shown below, determine which one (s) should be selected.

Alternative                 present value

A 25000

B 12000

C 10000

D 15000

Expert Solution

The statement is incomplete but still the concept can be cleared to you for our problem ------ how to select an alternative out of so many so as to choose the best

We will apply capital budgeting technique -----

Net present value.

This technique works well when the projects under consideration are mutually exclusive.

Formula of Net present value------ Present value of inflows - present value of outflows

- present value of inflows are calculated by multiplying the discount rate (of $1 for n years from present value table) with the amount of inflows

- similarly present value of outflows are also calculated by multiplying it with table value at given discount rate for n years

- Now we will deduct pv of outflows from pv of inflows

- The result is NPV

- If npv is positive,select the alternative,if it is negetive,reject the alternative.

Rahul Sunny answered 2 years ago

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