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Enter These Values Into The Cash Flow Register
Enter These Values Into The Cash Flow Register
Enter These Values Into The Cash Flow Register
30.
Then enter I/YR = 12, and press the NPV key to get NPV A = $12.764 million.
Enter these cash flows into the cash flow register, along with the interest rate, and press the NPV
key to get NPVB = $9.256 million. Project A is the better project and will increase the
company’s value by $12.764 million.
The EAA of plane A is found by first finding the PV: N = 5, I/YR = 12, PMT = 30, FV = 0;
solve for PV = $108.143. The NPV is $108.143 − $100 = $8.143 million. We convert this to an
equivalent annual annuity by inputting: N = 5, I/YR = 12, PV = -8.143, FV = 0, and solve for
PMT = EAA = $2.259 million. For plane B, we already found the NPV of $9.256 million. We
convert this to an equivalent annual annuity by inputting: N = 10, I/YR = 12, PV = -9.256, FV =
0, and solve for PMT = EAA = $1.638 million.