Consider the following alternative projects in the table below.Each project would last for five...

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Accounting

Consider the following alternative projects in the table below.Each project would last for five years.
1) Findthe NPV for each project at a 10% discount rate.
2) Findthe profitability index for each project at a 10% discountrate.
3) What discount rate would make the NPV=0 (i.e. breakeven in time)for each project?
Use excel to populate the table below. Show all cell references,show all formulas used, and show all calculationsclearly.
Project A
Project B
    Initial investment
$80,000
$60,000
    Annual net cash inflows
20,000
16,000
$5,000 in maintenance
Year 2
Year 3
    Salvage value
10,000
8,000

Answer & Explanation Solved by verified expert

4.3 Ratings (640 Votes)

Project A Year Cash Outflow Cash Inflow Net Cash Flow Discounting factor at 10 Discounted Cash flow 1 2000000 2000000 0909090909 1818182 2 500000 2000000 1500000 0826446281 1239669 3 2000000 2000000 0751314801 1502630 4 2000000 2000000 0683013455 1366027 5 2000000 2000000 0620921323 1241843 5 1000000 1000000 0620921323 620921 Present value of Cash Flows 7789272 Less Initial Investment 8000000 Net Present Value 210728 Profitability Index 778927280000 See Answer

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In: AccountingConsider the following alternative projects in the table below.Each project would last for five years....Consider the following alternative projects in the table below.Each project would last for five years.1) Findthe NPV for each project at a 10% discount rate.2) Findthe profitability index for each project at a 10% discountrate.3) What discount rate would make the NPV=0 (i.e. breakeven in time)for each project?Use excel to populate the table below. Show all cell references,show all formulas used, and show all calculationsclearly.Project AProject B Initial investment$80,000$60,000 Annual net cash inflows20,00016,000$5,000 in maintenanceYear 2Year 3 Salvage value10,0008,000

Project A	Project B
Initial investment	$80,000	$60,000
Annual net cash inflows	20,000	16,000
$5,000 in maintenance	Year 2	Year 3
Salvage value	10,000	8,000