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[Fact Pattern #1] A company that annually reviews its investment opportunities and selects...

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Accounting

[Fact Pattern #1]
A company that annually reviews its investment opportunities and selects appropriate capital expenditures for the coming year is presented with two projects, called Project A and Project B. Best estimates indicate that the investment outlay for Project A is $30,000 and for Project B is $1 million. The projects are considered to be equally risky. Project A is expected to generate cash inflows of $40,000 at the end of each year for 2 years. Project B is expected to generate cash inflows of $700,000 at the end of the first year and $500,000 at the end of the second year. The company has a desired rate of return of 8%.
[1]( Refers to Fact Pattern 1)
What is the net present value (NPV) of each project when the desired rate of return is zero?
A.
B.
C. $80,000
Project B
\table[[,Project A,Project B],[A.,$30,000,$1,000,000
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