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What is NPV and Cash Flow Analysis in Capital Budgeting about?

Product A has a negative NPV of -$180,000 + $25,860/(1.12)^1 + ... + $23,385/(1.12)^14 = -$81,863. Product B has a positive NPV of -$150,000 + $30,000/(1.12) + ... + $30,000/(1.12)^14 = $39,340. Therefore, the recommendation is to accept Product B and reject Product A and continuing renting, as Product B has the higher positive NPV.

Author

Viswanath Kapavarapu

Language

EN