12-7. Continued b. Net Present Value Method Project A Year Cash Flow PVIF at 10% Present value $12000 909 $10908 2$8.000 826 $6,608 3$6,000 751 4506 Present Value of Inflows $22022 Present Value of outflows 10.000 Net present value $12022 Project B Year Cash Flow PVIe at 10% Present Value $10000 09 9090 2$6000 826 $4,956 3$16000 751 $12016 Present Value of inflows $26.062 Present Value of outflows 10000 Net Present value $16,062 Under the net present value method you should select project B because of the higher net present value C. A company should normally have more confidence in answer b because the net present value considers all inflows as well as the time value of money. The heavy late inflow for Project B was partially ignored under the pay back method S-429 Copyright C2005 by The McGra-Hill Companies, Inc.Copyright © 2005 by The McGraw-Hill Companies, Inc. S-429 12-7. Continued b. Net Present Value Method Project A Year Cash Flow PVIF at 10% Present Value 1 $12,000 .909 $10,908 2 $ 8,000 .826 $ 6,608 3 $ 6,000 .751 $ 4,506 Present Value of Inflows $22,022 Present Value of Outflows 10,000 Net Present Value $12,022 Project B Year Cash Flow PVIF at 10% Present Value 1 $10,000 .909 $ 9,090 2 $ 6,000 .826 $ 4,956 3 $16,000 .751 $12,016 Present Value of Inflows $26,062 Present Value of Outflows 10,000 Net Present Value $16,062 Under the net present value method, you should select Project B because of the higher net present value. c. A company should normally have more confidence in answer b because the net present value considers all inflows as well as the time value of money. The heavy late inflow for Project B was partially ignored under the payback method