Long description

Each of the timelines is labeled “End of Year” and is numbered from 0 to 5 in increments of 1. The first timeline is for Project A. The investment for year 0 is shown as negative 420,000 dollars and the operating cash inflow for each year from 1 to 5 is shown as 140,000 dollars. The present value (at r equals 10 percent) for all the cash inflows is shown as 530,710 dollars resulting in a NPV of 110,710 dollars for project A.

The second timeline is for Project B. The investment for year 0 is shown as negative 450,000 dollars and the operating cash inflow with respective present values (at r equals 10 percent) are shown as follows:

  • Year 1: 280,000 dollars

    • − Present value: 254,545 dollars

  • Year 2: 120,000 dollars

    • − Present value: ...

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