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Alternative projects for producing and marketing

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The King Corporation has two alternative projects for producing and marketing video game. Project A requires an initial outlay of $250,000 and will generate annual cash flows of $40,000 for 20-years. Project B requires an initial outlay of $350,000, but will generate annual cash flows of $55,000 for 20 years. It is estimated that both projects have no salvage value at the end of year 20. Firm's RRR is 7% and the annual cash flows on both projects are already include depreciation and taxes each year. Using the given information, answer the following questions.

a. Find the NPV of project A.

b. Find the NPV of project B.

c. What is the difference of two NPVs?

d. If two projects have same NPV (that is, the difference of two NPVs is zero), what is the Firm's RRR? Copy and paste your whole answers from the sheet "P2" to the sheet "P2d" and work on the sheet "P2d".

Reference no: EM131093436

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