Question

Score: 46 % , 4.6 of 10 pts Question Help Ftycent Inc., has hired you to advise the Sm on a capital budgeting issue involving two unequal-ived, mutually exclusive projects, S and T. The cash fows for sach project ane presented in the following table Calculate the NPV and the annualized net present value (ANPV) for each project using the fim's cost of capital of 8.1% Which project would you recommend? (Click on the loon located on the op-ight oomer of the data table below in onder to copy ts contents into a spreadsheel) Project S $42.700 Preject T $67.100 Initial Investment Cash Inflows $17.670 Year $26,500 1 2 25,200 22.200 36,200 19.600 3 35,800 4 The NPV for project S is S (Round to the nearest cent)

please I need them all

please do this one

Answer 1

NPV is given by:

NPV = L Rt/(1 + i) ,t varies from 1 ton where Rt = Cash flow netted (Inflow - Outflow) during the period "t" i = Discount rate t = number of periods

For Project S

NPV = [17700 / (1 + 8.1%)^¹] + [23700 / (1 + 8.1%)^²] + [36800 / (1 + 8.1%)^³] - Initial Investment

NPV = 16373.73 + 20281.35 + 29132.03 - 41800

NPV = $ 23987.11

ANPV = NPV / PVIFA

PVIFA = present value interest factor of annuity

PVIFA = [1 - (1 + r)^^(-n) ] / r

where r = discount rate

n = term of project

PVIFA = [1 - (1 + 8.1%)^^(-3) ] / 8.1%

PVIFA = [1 - 0.792] / 8.1%

PVIFA = 2.572

Hence,

ANPV = 23987.11 / 2.572

ANPV = $ 9324.60

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For Project T

NPV = [26100 / (1 + 8.1%)^¹] + [23500 / (1 + 8.1%)^²] + [36600 / (1 + 8.1%)^³] + [19200 / (1 + 8.1%)^⁴] + [9900 / (1 + 8.1%)^⁵] + [15310 / (1 + 8.1%)^⁶] + [9810 / (1 + 8.1%)^⁷] - Initial Investment

NPV = 24144.31 + 20110.20 + 28973.70 + 14060.43 + 6706.67 + 9594.47 + 5687.08 - 68300

NPV = $ 40976.86

ANPV = NPV / PVIFA

PVIFA = present value interest factor of annuity

PVIFA = [1 - (1 + r)^^(-n) ] / r

where r = discount rate

n = term of project

PVIFA = [1 - (1 + 8.1%)^^(-7) ] / 8.1%

PVIFA = [1 - 0.580] / 8.1%

PVIFA = 5.189

Hence,

ANPV = 40976.86 / 5.189

ANPV = $ 7897.46

Since, ANPV of Project S > ANPV of Project T, we should choose Project S