NPV of Project A = $32,000 * PVAF5, 0.11 - $100,000
($32,000 * 3.696) – ($100,000), $118,272 - $100,000
Project A NPV: $18,272
NPV OF Project B = $200,000 * PVAF5, 0.11 - $100,000
($200,000 * 3.696) – ($100,000)
$739,200 - $100,000 Project B NPV: $639,200 ( Actually I think I messed up here, I am assuming the cash flow of $200,000 will occur every year, and I do not think that is correct.) The present value of $200,000 received at the end of the 5 year period at 11% for 5 years I believe should be 0.59345, and when multiplied with 200,000 gives 118,690. I believe that NPV for B should be 18,690. When all things considered, B seems to be much better than A.
If doing a lease versus buy for the two projects . . .
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