114) The Serena Company is evaluating two mutually exclusive projects with three-year lives.  Each project requires an investment of $10,000.  The projects have the following cash inflows received at the end of each year.

YEARPROJECT 1PROJECT 2

1$2,000$  6,000

24,0004,000

36,0002,000

TOTAL$12,000$12,000

a. Determine the net present value of each project using an 8% discount rate.

b. What can you conclude about the effect the timing of the cash flows has upon a project’s net present value?

115) Cedric Inc. is considering two mutually exclusive projects.

Project 1 requires an investment of $100,000 while project 2 requires an investment o $110,000.

Revenues and costs for each project are shown below.

PROJECT 1

_____________________________________________________

     Year1234

Revenues$40,000$60,000$70,000$80,000

Variable costs10,00015,00020,00020,000

Fixed costs5,0005,0006,0008,000

PROJECT 2

_____________________________________________________

     Year1234

Revenues$60,000$75,000$51,000$45,000

Variable costs20,00025,00017,00015,000

Fixed costs7,0007,0007,0008,000

The company estimates that at the end of the fourth year Project 1 would have a salvage value of $20,000 and Project 2 would have a salvage value of $10,000.

Determine the net present value of each project using a 14% discount rate.



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