Project a Requires an Original Investment of $50,000

question 35

Essay

Project A requires an original investment of $50,000. The project will yield cash flows of $15,000 per year for 7 years. Project B has a computed net present value of $13,500 over a 4-year life. Project A could be sold at the end of 4 years for $25,000. (a) Using the present value tables that follow, determine the net present value of Project A over a 4-year life with salvage value assuming a minimum rate of return of 12%. (b) Which project provides the greatest net present value?
Following is a table for the present value of $1 at compound interest: Following is a table for the present value of an annuity of $1 at compound interest:

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Definitions:

Volcanic

Pertaining to the processes associated with the eruption and formation of volcanoes and their emitted materials.

Basalt

A dark, fine-grained volcanic rock that is formed from the rapid cooling of basaltic lava exposed at or very near the surface of a planet.

Sedimentary Terrain

Areas dominated by sedimentary rocks, which are formed from the accumulation and lithification of mineral and organic particles over time.

Youngest

This term refers to the most recently formed or last in a sequence, often used in contexts related to geologic formations or the age of geological layers.