As the manager of the pension fund, you are frequently targeted by
software companies peddling investment simulation software. You have finally narrowed down your choice to two applications. You need to analyze the options by calculating NPV, IRR and Payback Periodbased on their purchase price and savings to your company over time. Your staff has prepared a cash-flow table to help you. Year zero shows the purchase price of each application, and the figures listed for years 1-3 represent the savings to the company in successive years.
YearApplication IApplication II0 (today)-$500,000-$800,0001$400,000$500,0002$700,000$740,0003$470,000$600,000
You are trying to decide which Application to use and will choose the Application that has a larger NPV. Calculate the NPV of both Applications if the required rate of return is 9.08 percent. Now as your answer, write the NPV for the chosen Application.

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A firm is evaluating a product. The market demand for the product can be low or high.
The product requires an investment of $1,080.

If the market demand is low, then there is a 70% chance that the product will sell for $800 and a 30% chance it will sell for $1,200.

What is the NPV of the project if the market demand is low?

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