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# TOPIC: Questionpresent values

## present values 1 year 4 months ago #8167

 Twana Amin Topic Author Offline Fresh Boarder Posts: 6 Thank you received: 1 Hi, Below question is from Oliver Lehmann, Kindly I need support how to calculate it. A company has to make a choice between two projects, because the available resources in money and kind are not suffihow cient to run both at the same time. Each project would take 9 months and would cost \$250,000.1.The first project is a process optimization which would result in a cost reduction of \$120,000 per year. This benefit would be achieved immediately after the end of the project. 2.The second project would be the development of a new product which could produce the following net profits after the end of the project: 1. year: \$ 15,000 2. year: \$ 125,000 3. year: \$ 220,000 Assumed is a discount rate of 5% per year. Looking at the present values of the benefits of these projects in the first 3 years, what is true? Both projects are equally attractive. The first project is more attractive by app. 7%. The second project is more attractive by app. 5%. The first project is more attractive by app. 3% BR// Twana Your e-mail address will never be displayed on the site. Check this box to be notified of replies to this topic. Note: BBcode and smileys are still usable.
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