Potential projects A and B have the following cash flows Use

\"Potential projects A and B have the following cash flows. Use i = 13.4% annual rate compounded annually. Enter the Net Present Worth (NPW) of the preferred project. If neither project should be selected, enter 0.
Project A
Year 0: -$4,700
Year 1: $2,600
Year 2: $2,100
Year 3: $900
Project B
Year 0: -$4,000
Year 1: $2,800
Year 2: $1,500
Year 3: $400\"

Solution

Project A:

Present value of cash Inflow = [PVF13.4%,1*CF1]+[PVF13.4%,2*CF2]+[PVF13.4%,3*CF3]

     = [.88183*2600]+[.77763*2100]+[.68574*900]

        = 2292.76+ 1633.02+ 617.17

         = $ 4542.95

Net present worth= present value -initial cost

         = 4542.95- 4700

         = $ -157.05

Project B:

Present value of cash Inflow = [PVF13.4%,1*CF1]+[PVF13.4%,2*CF2]+[PVF13.4%,3*CF3]

     = [.88183*2800]+[.77763*1500]+[.68574*400]

      = 2469.12+ 1166.45+ 274.30

      =$ 3909.87

NPW = 3909.87-4000

= $- 90.13

Since Net present worth of both project is negative ,none of the project should be selected .