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  • Determining The Net Present Value

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    Mahid Rahman
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    Project B has a higher net present value than Project A when the firm's cost of capital is 15%, as Project B's NPV is $5,495.47 compared to Project A's NPV of $4,708.80. Both projects have an internal rate of return above the firm's cost of capital, meaning they should be accepted, though Project B's IRR of 20% is higher than Project A's IRR of 15.20%.

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    NPV Calculation

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    Project B has a higher net present value than Project A when the firm's cost of capital is 15%, as Project B's NPV is $5,495.47 compared to Project A's NPV of $4,708.80. Both projects have an internal rate of return above the firm's cost of capital, meaning they should be accepted, though Project B's IRR of 20% is higher than Project A's IRR of 15.20%.

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    13 views2 pages

    Determining The Net Present Value

    Uploaded by

    Mahid Rahman
    Project B has a higher net present value than Project A when the firm's cost of capital is 15%, as Project B's NPV is $5,495.47 compared to Project A's NPV of $4,708.80. Both projects have an internal rate of return above the firm's cost of capital, meaning they should be accepted, though Project B's IRR of 20% is higher than Project A's IRR of 15.20%.

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    © All Rights Reserved
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    of 2

    Determining the net present value

    Firm's cost of capital 15%


    Year-end cash flow
    Year Project A Project B
    0 -$42,000 -$45,000
    1 $14,000 $28,000
    2 $14,000 $12,000
    3 $14,000 $10,000
    4 $14,000 $10,000
    5 $14,000 $10,000
    NPV $4,708.80 $5,495.47
    IRR 20%

    15.20%
    Determining the net present value
    Firm's cost of capital 17%
    Year-end cash flow
    Year Project A
    0 -$9,755,000.00
    1 $4,960,625.00
    2 $5,215,270.00
    3 $5,431,404.80
    4 $5,620,855.19
    5 $5,744,168.38
    6 $2,437,586.60
    NPV $8,192,659.37
    IRR $0.47

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