Question

1.NPV

Your division is considering two investment projects, each of which requires an up-front expenditure of $17 million. You estimate that the investments will produce the following net cash flows:

Year	Project A		Project B
1	$ 6,000,000		$20,000,000
2	10,000,000		10,000,000
3	20,000,000		7,000,000

1. What are the two projects' net present values, assuming the cost of capital is 5%? Do not round intermediate calculations. Round your answers to the nearest dollar.

   Project A: $  

   Project B: $  

   What are the two projects' net present values, assuming the cost of capital is 10%? Do not round intermediate calculations. Round your answers to the nearest dollar.

   Project A: $  

   Project B: $  

   What are the two projects' net present values, assuming the cost of capital is 15%? Do not round intermediate calculations. Round your answers to the nearest dollar.

   Project A: $  

   Project B: $  

2. What are the two projects' IRRs at these same costs of capital? Do not round intermediate calculations. Round your answers to two decimal places.

   Project A:      %

   Project B:      %

2.

Profitability Index

A project has an initial cost of $55,000, expected net cash inflows of $15,000 per year for 6 years, and a cost of capital of 14%. What is the project's PI? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1