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Homework answers / question archive / Mega Power would like to evaluate 5 projects A, B ,C ,D and E with the following cash flows
Mega Power would like to evaluate 5 projects A, B ,C ,D and E with the following cash flows.
Project Cashflow-Year:0 Year:1 Year:2 Year:3
A -150 000 80 000 60 000 70000
B -120 000 80 000 80 000 80 000
C -200 000 100 000 120 000 140 000
D -300 000 150 000 150 000 150 000
E -250 000 150 000 100 000 100 000
Mega Power employs the net present value as a capital budgeting technique. The company's cost of capital is 12%. Which projects must Mega Power undertake and in which order in order for it to maximize shareholders wealth?
In order to maximize the shareholder's wealth the company must accept Project with the highest NPV.
Hence Project C should be selected.
