Net Present Value Analysis
|
Description of Cash Flow |
Years passed before cash flow is assumed to accrue |
Option 1: Projected cash flows |
Option 2: Projected cash flows |
|
Initial construction outlay |
1 |
-$10,000,000 |
-$10,000,000 |
|
Maintenance outlay |
10 |
-$200,000 |
-$900,000 |
|
Maintenance outlay |
15 |
-$800,000 |
-$100,000 |
|
Salvage (inflow) |
30 |
$200,000 |
$1,000,000 |
Which of the two projects would you recommend based on NPV analysis? To receive credit you need to provide support for your answer by providing the NPV for each of the two options.