From the image, it appears that you are tasked with calculating the Net Present Value (NPV) for two projects (A and B) over a span of four years. The cost of capital is given as 11.2%. Below is the cash flow information for the two projects:

• Project A:
  Year 0: -$110
  Year 1: $60
  Year 2: $50
  Year 3: $40
  Year 4: $30

• Project B:
  Year 0: -$110
  Year 1: $47
  Year 2: $50
  Year 3: $53
  Year 4: $60

Questions:

1. What is the NPV of each project?
2. Which project should be chosen if only one can be selected?

I will now proceed with calculating the NPV for both projects using the provided cash flows and the cost of capital (11.2%).

The NPV formula is: $\text{NPV} = \sum \frac{C_t}{(1+r)^t} - C_0$ Where:

• $C_t$ is the cash flow at time $t$
• $r$ is the discount rate (11.2%)
• $C_0$ is the initial investment (Year 0)

Let's calculate that.The Net Present Values (NPVs) for the two projects are:

• NPV for Project A: $33.1 (rounded to one decimal place)
• NPV for Project B: $50.5 (rounded to one decimal place)

Since Project B has a higher NPV, it would be the better investment based on maximizing NPV.

Would you like further details or clarifications on the calculation process?

Follow-up questions:

1. How does the discount rate affect NPV calculations?
2. Why is NPV a reliable metric for comparing projects?
3. What happens to NPV if the cash flows change significantly in later years?
4. Could a project with a lower NPV ever be preferable under different criteria?
5. How would inflation impact the discount rate and thus the NPVs?

Tip: NPV helps account for the time value of money, showing how much future cash flows are worth today.