LMN Inc. is reviewing two investment opportunities, Project A and Project B. Both projects need...
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Accounting
LMN Inc. is reviewing two investment opportunities, Project A and Project B. Both projects need an initial outlay of AUD 100,000. The cash inflows for each project are:
Year | Cash Flows (Project A) | Cash Flows (Project B) |
Initial Investment | (100,000) | (100,000) |
1 | 30,000 | 25,000 |
2 | 30,000 | 25,000 |
3 | 30,000 | 25,000 |
4 | 30,000 | 25,000 |
a. Determine the Net Present Value (NPV) for both projects assuming a cost of capital of 7%.
b. Which project should the company undertake and why?
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