![stephaniero6](/avatars/12213.jpg)
stephaniero6
05.06.2021 •
Mathematics
A company is considering to choose between two investment projects with the
following details.
Project A : Costs RM7 million in upfront costs and will generate RM3 million in
annual income for five years starting three years from now.
Project B : Costs RM2.5 million upfront and RM2 million in each of the next
three years. This project generates no annual income but will be sold
six years from now for a sales price of RM16 million.
By using Net Present Value approach, with a discount rate of 8%, determine
which project should be choosen by the company.
Solved
Show answers
More tips
- O Other How to Accidentally Get a Rare Coin with Your Change and How to Know Its Value?...
- S Society and Politics How Could Nobody Know About the Dead Mountaineers?...
- D Dating, Love, Relationships Why do we feel shame?...
- F Family and Home Why Does God Punish Us Constantly and How Can We Fix It?...
- F Family and Home Do Lullabies Help Babies Sleep or Is it Just a Myth?...
- B Business and Finance How to Get Your Money Back When Lending? Top 7 Ways...
- S Society and Politics Выборы: Смысл, Значение и Отражение...
- D Dating, Love, Relationships Why Should the Man be Active and the Woman Passive during Foreplay?...
- P Philosophy How did the concept of module arise in computer science?...
- S Society and Politics Why are thugs called gopniks ? A fascinating journey through Russian subculture...
Answers on questions: Mathematics
- M Mathematics Solve for t. d = rt a. t = dr b. t = r/d c. t = d/r d. t = d – r...
- M Mathematics The han dynasty lasted from 206 b.c. to 9 a.d. how many years did the dynasty last?...
- M Mathematics Avehicle with power steering makes a hissing or whirring sound when the wheel is turned all the way to the stops. technician a says that this is a normal condition....
- M Mathematics Kayla plans to swim 2 laps per minute until she swims 12 laps. she figures this will take 16 minute. which is not a reason why this conclusion is wrong?...
- M Mathematics List the following numbers in order from least to greatest. 2.31,2.13,0.123,3.12...
- M Mathematics Paul is looking at two vacation packages while planning a trip to cancun, mexico. in the first vacation package, round-trip airfare costs $448, and it costs $157...
- M Mathematics Approximately how many inches are in 6 meters? a) 72 inches b) 144 inches c) 216 inches d) 234 inches...
- M Mathematics I m too tired to answer this question...
- M Mathematics In simple interest what is $1,500 at 1.2% for 9 months...
- M Mathematics Jacob mixes 1/3 cup o yellow paint for every 1/5 cup of blue paint to make green paint how many cups of yellow paint are needed for one cup of blue paint...
Ответ:
Project A should be chosen as it has the highest NPV.
Step-by-step explanation:
Project A
Present value of inflows:
First find the present value of inflows 3 years from today. Bear in mind that the inflow is constant so this is an annuity:
= 3 million * Present value interest factor of annuity, 8%, 5 years
= 3 million * 3.9927
= RM11,978,100
Discount this value to the present:
= 11,978,100 / (1 + 8%)³
= RM9,508,602
Net Present value = Present value of inflows - Investment
= 9,508,601 - 7,000,000
= RM2,508,601
Project B:
Find present value of costs:
= 2,500,000 + (2 million * Present value interest factor of annuity, 3 years, 8%)
= 2,500,000 + (2,000,000 * 2.5771)
= 2,500,000 + 5,154,200
= RM7,654,200
Net present value = (16,000,000 / (1 + 8%)⁶) - 7,654,200
= RM2,428,514
Project A should be chosen as it has the highest NPV.
Ответ:
201.53
Step-by-step explanation: