Respuesta :
Answer:
Selection 1 has lowest NPV = $316.9
Explanation:
Rate of discount is 10% therefore PV factor for every year = [tex]\frac{1}{(1+0.1){^n}}[/tex]
Here 0.1 because interest rate is 10% n = number of year for year 1 = 1 for year 2 = 2 and so on.
Selection 1
Year     Cash Flow     PV Factor     Value
 1        $100         0.909        $90.9
 2        $100          0.826        $82.6
 3        $100         0.751         $75.1
 4        $100         0.683        $68.3
Net Present Value               =     $316.9
Selection 2
In this only in 4th year the payment is received = $500 X 0.683 PV Factor
= $341.5
Selection 3
Only in year 1 $350 is received = $350 X 0.909 = $318.15
Selection 4
Year     Cash Flow     PV Factor     Value
 1        $50         0.909        $45.45
 2        $50          0.826        $41.3
 3        $50         0.751         $37.55
 4        $375         0.683       $256.125
Net Present Value               =    $380.425
Selection 1 has lowest NPV = $316.9
