[ICM117]

Wiley Question –

Sorry about the formatting it completely changes when I hit submit, i tried to break the columns up

Can someone help explain this?

Investment project: | Cash outlay | PV of cash inflow

A | $1,100,00 | $980,000

B | $250,000 | $600,000

C | $1,400,000 | $1,830,000

D | $650,000 | $790,000

The company has $2,000,000 of financing available for new investment projects. If only one project may be selected, which should the company undertake?

The answer is C, but why isn’t it b? Can someone explain?

[orivera24]

You want to select the answer that yields the highest NPV. NPV is calculated by subracting the cost of the investment from the present value of the future cash flows. . Each answer to the question gives you present value and project cost. Net the two. Whichever is higher is the better investment.

AUD: 75
FAR: 77
REG: 82
BEC: 73 11/23/13

[orivera24]

You want to select the answer that yields the highest NPV. NPV is calculated by subracting the cost of the investment from the present value of the future cash flows. . Each answer to the question gives you present value and project cost. Net the two. Whichever is higher is the better investment.

AUD: 75
FAR: 77
REG: 82
BEC: 73 11/23/13

[ICM117]

Hahhaha I feel like an idiot. I think i need a break from studying. In my head 650-250 was 450 which is greater than 430 from option C. I think its time for a break. Thank you!

[ICM117]

Hahhaha I feel like an idiot. I think i need a break from studying. In my head 650-250 was 450 which is greater than 430 from option C. I think its time for a break. Thank you!

[orivera24]

hahaha. I know the feeling. Sometimes you just need to step back and have a few cold ones.

AUD: 75
FAR: 77
REG: 82
BEC: 73 11/23/13

[orivera24]

hahaha. I know the feeling. Sometimes you just need to step back and have a few cold ones.

AUD: 75
FAR: 77
REG: 82
BEC: 73 11/23/13

[Author]

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