Answer to Question #175269 in Management for hsg

Question

Management is in the process of selecting one out of the following three projects. Use

NPV method to suggest the best option out of the following three projects and give

justification for your suggestion. Consider Required Rate of Return as 10%.

Answer 1

Net Present Value is the variance between the project’s current value of cash inflow and the current value of cash outflow. The NPV ought to be constantly positive. When selecting a project, one with an upper NPV is favored. Therefore, the advantage of allowing for the NPV over the Payback Period is that it proceeds into thought the future value of money.