Problem
Two projects have been proposed and you can only choose one of them. Both projects require an equal initial investment cost. The initial investment for the first project is followed by six years of equal net returns. Following the second project's initial investment are declining net returns, and in its final year there are decommissioning costs. What is the NPVs for each project, assuming 8% cost of capital?
|
Net Cash Flows (in dollars)
|
|
Year
|
0
|
1
|
2
|
3
|
4
|
5
|
6
|
|
Project A
|
-100
|
40
|
40
|
40
|
40
|
40
|
40
|
|
Project B
|
-100
|
90
|
80
|
50
|
35
|
25
|
-40
|