(Answered) Assume a firm is considering to invest and it has estimated

Finance

Assume a firm is considering to invest and it has estimated the cash outflows (costs) and cash inflows of the underlined projects as follows. The projects have a five year life.

year Project A cash flows Project B cash flows

0 ($8,000) ($8,000)

1 12,625 0

2 0 5,000

3 15,625 0

4 0 0

5 100,625 130,000

Task: If the required rate of return on these projects is 8%, which project would be acceptable and why? Base your decision on NPV calculations.

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