Question

economics question

"Potential projects A and B have the following cash flows. Use i = 12.3% annual rate compounded annually. Enter the Net Present Worth (NPW) of the preferred project. If neither project should be selected, enter 0.
Project A
Year 0: -$5,600
Year 1: $3,100
Year 2: $2,200
Year 3: $700
Project B
Year 0: -$4,300
Year 1: $3,000
Year 2: $2,200
Year 3: $400"

Answer 1

Years	Project A	Discounted cash flow	Working
0	(5,600.00)	(5,600.00)	=-5600/1.123^0
1	3,100.00	2,760.46	=3100/1.123^1
2	2,200.00	1,744.47	=2200/1.123^2
3	700.00	494.26	=700/1.123^3
	Total	-600.80
Years	Project B	Discounted cash flow	Working
0	(4,300.00)	(4,300.00)	=-4300/1.123^0
1	3,000.00	2,671.42	=3000/1.123^1
2	2,200.00	1,744.47	=2200/1.123^2
3	400.00	282.44	=400/1.123^3
	Total	398.32

Project A has negative cash flow of $ -600.80 (Net present worth) hence, it should be rejected.                                          

*Project B has positive cash flow of $ 398.32 (Net present worth) hence, it should be accepted*