Jan-Stone Limited is looking into the following two
Jan-Stone Limited is looking into the following two (2) investment projects:
Project | A | B |
Cost of Investment | $450,000 | $560,000 |
Estimated net cash flows | ||
Year | $ | $ |
1 | 180,000 | 220,000 |
2 | 160,000 | 200,000 |
3 | 130,000 | 170,000 |
4 | 110,000 | 150,000 |
5 | 90,000 | 120,000 |
6 | 60,000 | 80,000 |
730,000 | 940,000 |
The company’s required rate of return for both projects is 15%.
Required:
a. Calculate the net present value (NPV) for both projects.
b. Evaluate and advise the management which one of the projects to opt for, if any.