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rate positively ..
| We have to compute the NPV of both the project. The with higher NPV will be selected | |||||||
| Year | A | B | PVIF @ 10% | Present value A | Present value B | ||
| 0 | -50000 | -50000 | 1 | (50,000.00) | (50,000.00) | ||
| 1 | 15000 | 0 | 0.909091 | 13,636.36 | - | ||
| 2 | 15000 | 0 | 0.826446 | 12,396.69 | - | ||
| 3 | 15000 | 0 | 0.751315 | 11,269.72 | - | ||
| 4 | 15000 | 0 | 0.683013 | 10,245.20 | - | ||
| 5 | 15000 | 99000 | 0.620921 | 9,313.82 | 61,471.21 | ||
| NPV = | 6,861.80 | 11,471.21 | |||||
| We can see the project B has higher NPV. | |||||||
| therefore we should select the project B | |||||||
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