Project A Project B Year Cash Flow Cash Flow 0 -$140,000 -$100,000 1 60,000 30,000 2 60,000 30,000 3 60,000 30,000 4 30,000 5 30,000 6 30,000 What is the NPV for each investments under the replacement approach?

Xyz company is confronted with two mutually-exclusive investment opportunities

You can calculate the NPV of each investment using this formula.
NPV = CF0 + (CF1/(1+r)) + (CF2/(1+r)^2) + … + (CFn/(1+r)^n).
Where r is cost of Capital and CF represents Cash Flows in a specific year. We have the following for Project A:

(60k/ 1+0.12) + 60k/ 1+0.122 + 60k/ 1+0.123 + 30k/ 1+0.124 + $30k/ 1+0.124 + $30k/ 1+ 0.125 + $30,000/ 1+ 0.126

Therefore, the NPV is -$24 553.

Project B has:

The NPV is -$100,000+$30 000/( 1+.012 $ 30 000/( 1+.012 $300 000/( 1+.012 $50 000/( 1+.012 $60 000/( 1+.012 )2 )+$30 000/( 1+.012 $ 30000/( HTML0 ) + HTML0 )+.0)

The NPV of Project B is therefore -$50 872