



Practice Free Cost Management Set 6 Questions Set 1





Smell is a company which specializes in computer sales, computer systems and network installation, computer systems support and IT training. Smell is working with a company called MicroHard, to help decide which computer systems and networks to invest in. Smell has provided the executive, Bill Doors from MicroHard, with three possible solutions for this project. Bill Doors will use NPV as one selection method to determine which solution to choose. Solution A will have an initial investment of $1,700,000 with a total projected cash flow of $2,900,000 over 5 years. Solution B will have an initial investment of $3,500,000 with a total projected cash flow of $2,700,000 over 5 years. Solution C will have an initial investment of $6,500,000 with a total projected cash flow of $6,000,000 over 5 years. The total projected cash flow for each of the three projects is adjusted with a 7% interest rate over 5 years. If Bill Doors at MicroHard used NPV as the only selection method for choosing the solution, which solution would be the BEST choice?














