Asked by George Maillard Jr. on Jul 15, 2024
Verified
A company has a decision to make between two investment alternatives.The company requires a 10% return on investment.Predicted data is provided below:
Required:
(a)Calculate the net present value for each investment.
(b)Which investment should this company select? Explain.
Net Present Value
A calculation that compares the present value of cash inflows to the present value of cash outflows over a period of time, used in capital budgeting to assess profitability of investments.
Return on Investment
A performance measure used to evaluate the efficiency or profitability of an investment or to compare the efficiency of several different investments.
- Determine the net present value (NPV) of an investment and understand its implications for project selection.
Verified Answer
(b)Select Investment A because it has a positive NPV and it is superior to Investment Z.
Learning Objectives
- Determine the net present value (NPV) of an investment and understand its implications for project selection.
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