Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects' NPVs, assuming a cost of capital of 12%. Do not round intermediate calculations. Round your answers to the nearest cent.

Instructions are below.

Explanation:

Giving the following information:

Project S:

Cash flows= $3,000

Number of periods= 5 years

Initial investment (Io)= $10,000

Project L:

Cash flows= $7,400

Number of periods= 5 years

Initial investment (Io)= $25,000

Cost of capital= 12%.

To calculate the net present value, we need to use the following formula:

NPV= -Io + ∑[Cf/(1+i)^n]

Project S:

To calculate the present value of the cash flows, first, we will determine the future value and then the present value.

FV= {A*[(1+i)^n-1]}/i

A= annual cash flow

FV= {3,000*[(1.12^5) - 1]} / 0.12

FV= $19,058.54

Now, the present value:

PV= FV / (1+i)^n

PV= 19,058.54 / (1.12^5)= $10,814.33

Finally, the NPV:

NPV= -10,000 - 10,814.33

NPV= 814.33

Project L:

∑[Cf/(1+i)^n]:

FV= {7,400*[(1.12^5) - 1]} / 0.12

FV= $47,011.07

PV= 47,011.07/1.12^5= $26,675.34

NPV= -25,000 - 26,675.34

NPV= 1,675.34

answer; /// the correct answer is (shared); /// good luck

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.