The cash flows for two projects, A and B, are shown in the table, below. Notice that Project A has a life of 3 years and Project B has a 2 year life. Use the replacement chain approach to calculate the NPV of each project over a common life-span
What is the NPV of the Project A chain minus the NPV of the Project B chain? Assume that the cost of capital is 8%.
Project CFs Project CFs
Time A B
0 -150 -104
1 66 66
2 66 66
3 66 0
NPV $20.09 $13.70
A) $0.45
B) $0.47
C) $0.49
D) $0.50
E) $0.52
E
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