A firm must choose from one of two proposed projects presented below. The firm's cost of capital is 11.25%. Using the NPV method, explain which of the two projects the firm should accept, with an initial investment of Initial Investment = $185,000
|
Year
|
Project A
|
Project B
|
PVA
|
PVB
|
|
1
|
$50,000
|
$15,000
|
|
|
|
2
|
$66,000
|
$17,000
|
|
|
|
3
|
$45,000
|
$25,000
|
|
|
|
4
|
$35,000
|
$75,000
|
|
|
|
5
|
$25,000
|
$70,000
|
|
|
|
6
|
$20,000
|
$45,000
|
|
|