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Project A requires an original investment of $64,300. The project will yield cash flows of $19,000 per year for seven years. Project B has a calculated net present value of $3,900 over a four year life. Project A could be sold at the end of four years for a price of $16,900.
Below is a table for the present value of $1 at Compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567
Below is a table for the present value of an annuity of $1 at compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605
(a) Using the present value tables above, determine the net present value of Project A over a four-year life with salvage value assuming a minimum rate of return of 12%. Round your answer to two decimal places.
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(b) Which project provides the greatest net present value?

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