Question

Assume that cash flows occur at each year-end using the WACC as the discount rate. make sure to show calculations.

11.41%
Year	Factor	Project A Cash Flow	Present Value
0	1.000	(300,000.00)
1	1.114	(10,000.00)
2	1.241	(10,000.00)
3	1.383	(10,000.00)
4	1.541	(10,000.00)
5	1.717	(10,000.00)
Net Present Value
11.41%
Year	Factor	Project B Cash Flow	Present Value
0	1.000	(45,000.00)
1	1.114	13,000.00
2	1.241	13,000.00
3	1.383	13,000.00
4	1.541	13,000.00
5	1.717	13,000.00
Net Present Value

Answer 1

Year	Factor	Project A Cash Flow	Present Value
0	1	-3,00,000.00	-300,000.00
1	0.897585495	-10,000.00	-8,975.85
2	0.805659721	-10,000.00	-8,056.60
3	0.723148479	-10,000.00	-7,231.48
4	0.649087586	-10,000.00	-6,490.88
5	0.582611602	-10,000.00	-5,826.12
Net Present Value			-336,580.93

Year	Factor	Project B Cash Flow	Present Value
0	1	-45,000.00	-45,000.00
1	0.897585495	13,000.00	11,668.61
2	0.805659721	13,000.00	10,473.58
3	0.723148479	13,000.00	9,400.93
4	0.649087586	13,000.00	8,438.14
5	0.582611602	13,000.00	7,573.95
Net Present Value			2,555.21

Notes:

1. NPV = Present Value of Cash inflows - Present Value of Cash outflows

2.

Discounting Factor for year 1 =1/ [1+(11.41/100)]^ 1

Discounting Factor for year 2 =1/ [1+(11.41/100)]^ 2

Discounting Factor for year 3= 1/ [1+(11.41/100)]^ 3

Discounting Factor for year 4 = 1/ [1+(11.41/100)]^ 4

Discounting Factor for year 5 = 1/ [1+(11.41/100)]^ 5

3. Present Value= Factor * Cash Flow