A firm must choose from one of two proposed projects presented below. The farm'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 = $185000
|
Year
|
Project A
|
Project B
|
PVA
|
PVB
|
|
Year 1
|
50,000
|
15,000
|
|
|
|
Year 2
|
66,000
|
17,000
|
|
|
|
Year 3
|
45,000
|
25,000
|
|
|
|
Year 4
|
35,000
|
75,000
|
|
|
|
Year 5
|
25,000
|
70,000
|
|
|
|
Year 6
|
20,000
|
45,000
|
|
|