(Solved):Calculate the incremental cash flows between Projects A and B. Please show work. Project A Year…

 

Question

Calculate the incremental cash flows between Projects A and B. Please show work.

Project A

Year 0 -100

Year 1 40

Year 2 50

Year 3 60

Year 4 N/A

Discount Rate .15

Project B

Year 0 -73

Year 1 30

Year 2 30

Year 3 30

Year 4 30

Discount Rate 0.15

 

EXPERT ANSWER

Incremental cash flows = Cash Flow of Project A – Cash flow of Project B.

So,

Incremental cash flows are:

Year 0 = -100 – (-70) = -$30.0

Year 1 = 40 – 30 =

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