# Finance, Accounting, and Banking Accounting, Finance Math Problem (Math Problem Sample)

finance, accounting, and banking

source..FINANCE, ACCOUNTING AND BANKING

Question 1

There are two projects A and B which cost $1000 and $900 respectfully and generate the next cash flows over the next five years

Project AProject B100350200350300350500350500350

What project is most profitable if the rate of return is 12%?

Solution

Given the rate of return calculate NPV of the two projects. We will use the NPV to compare which project is more profitable.

Project A

NPV=t=0∑n(1+i) tRt

i- Rate of return

t- Number of periods

NPV= Pv- initial investment

Project A

($100 + $200 + $300 + $500 + $500 = 1063.731(1+0.12)1 (1+0.12)2 (1+0.12)3 (1+0.12)4 (1+0.12)5

PV of the project- initial investment of project

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