Your firm has identified three potential investment projects. The projects and their cash flows are shown?...

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Finance

Your firm has identified three potential investment projects.The projects and their cash flows are shown? here:???(
Project
Cash Flow Today
?(millions)
Cash Flow in One Year
?(millions)
A
?$6
$17
B
$3
$6
C
$16
?$5
Suppose all cash flows are certain and the? risk-free interestrate is 7%.
a. What is the NPV of each? project?
b. If the firm can choose only one of these? projects, whichshould it? choose?
c. If the firm can choose any two of these? projects, whichshould it? choose?

Answer & Explanation Solved by verified expert

4.4 Ratings (946 Votes)

a Project A Discount rate 7000 Year 0 1 Cash flow stream 6 17 Discounting factor 1000 1070 Discounted cash flows project 6000 15888 NPV Sum of discounted cash flows NPV Project A 989 Where Discounting See Answer

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Transcribed Image Text

Your firm has identified three potential investment projects.The projects and their cash flows are shown? here:???(ProjectCash Flow Today?(millions)Cash Flow in One Year?(millions)A?$6$17B$3$6C$16?$5Suppose all cash flows are certain and the? risk-free interestrate is 7%.a. What is the NPV of each? project?b. If the firm can choose only one of these? projects, whichshould it? choose?c. If the firm can choose any two of these? projects, whichshould it? choose?

Project	Cash Flow Today ?(millions)	Cash Flow in One Year ?(millions)
A	?$6	$17
B	$3	$6
C	$16	?$5