Pierre Bouvier is evaluating four projects. The cash flows for the four projects are given here.
TIME 0 1 2 3 4
PROJECT K -100 40 40 40 40
PROJECT L -100 40 80 0 40
PROJECT M -90 40 80 0 30
PROJECT N -90 40 80 0 40
a. Pierre thinks you can rank these projects from best to worst by simply inspecting the cash flows (and not calculating anything). Try to do so.
b. Pierre next found the NPV of each project, discounting future cash flows at 10%. What is the NPV for each project?
c. Do your rankings in parts a and b agree?