06 ModelHW6 - Two mutually exclusive projects i= 12% Cash...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Two mutually exclusive projects i= 12% Cash Flows n Proj A Proj B NPW A NPW B 0 $(800) $(2,635) $(800) $(2,635) 1 $(1,500) $(565) $(1,339) $(504) 2 $(435) $820 $(347) $654 3 $775 $820 $552 $584 4 $775 $1,080 $493 $686 5 $1,275 $1,880 $723 $1,067 6 $1,275 $1,500 $646 $760 7 $975 $980 $441 $443 8 $675 $580 $273 $234 9 $375 $380 $135 $137 10 $660 $840 $213 $270 Sum NPW= $989 $1,696 NPW for each cash flow is cash flow divided by (1+i)^n. Project B has a larger NPW, so project B should be chosen.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Two mutually exclusive projects MARR= 15% Cash Flows n Proj. A NPW A Proj. B NPW B 0 $(3,000) $(3,000) $(8,000) $(8,000) 1 $400 $348 $11,500 $10,000 2 $7,000 $5,293 $400 $302 Sum NPW= $2,641 Sum NPW= $2,302 a) By NPW analysis, which should be chosen? Project A should be chosen, it has the larger NPW. b) Chart PW (A,B) from MARR = 0% to 50%. Over what range do you prefer project B? Answer: I prefer project A over the entire range. In general, projects with larger positive cash flows early will have better relative NPW's at high values of i, and those with later positive cash flows will do better at lower values of i. However, in this example, the NPW's do not cross over in the 0% to 50% range. Note:
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 05/12/2010 for the course BUSINESS BS515 taught by Professor Johnson during the Fall '09 term at Drexel.

Page1 / 9

06 ModelHW6 - Two mutually exclusive projects i= 12% Cash...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online