OverviewA company’s growth and development, and indeed its ability to remain competitive and survive, depends upon a constant flow of new investment ideas. The most common and effective method used to

OverviewA company’s growth and development, and indeed its ability to remain competitive and survive, depends upon a constant flow of new investment ideas. The most common and effective method used to evaluate investments in long-term projects is to determine each project’s net present value (NPV). The process of determining whether the future cash flow benefits arising from a long-term project are sufficient to justify the required up-front cash investment is also called capital budgeting. The net present value method uses a discount rate (interest rate) to restate all cash flows in terms of present values, and then makes comparisons on which project has the highest net present value.In this project you are provided expected cash flows over the course of five years for two alternative long-term projects that XYZ Entertainment Company is considering investing in. XYZ will only invest in one of the projects. XYZ uses a discount rate (interest rate) of 18% to calculate the present value of future cash flows.What You’ll Need Your MacBook Pro laptop Internet access MS Word softwarePrepare Complete the Week 3 Read & View assignment. Download the Project 3 Answer Sheet. EBS160_Project3AnswerSheetRM_MW1.docx23 KB Use the XYZ cash flow projections below to complete your calculations for this project. XYZ Long-Term Cash Flow Projection for Project ACash Investment at start of project (initial cash outflow) = ($1,000,000)Year 1: Cash inflow = $350,000Year 2: Cash inflow = $350,000Year 3: Cash inflow = $350,000Year 4: Cash inflow = $350,000Year 5: Cash inflow = $350,000 XYZ Long-Term Cash Flow Projection for Project BCash Investment at start of project (initial cash outflow) = ($1,000,000)Year 1: Cash inflow = $450,000Year 2: Cash inflow = $500,000Year 3: Cash inflow = $500,000Year 4: Cash inflow = $150,000Year 5: Cash inflow = $150,000The formula to calculate the present value of each year’s future cash inflow is:Present Value = Future Value / (1 interest rate)Number of YearsFollow these steps to determine each project’s net present value (NPV):1. Calculate the present value of the cash inflows for each of the 5 years.2. Sum all 5 years of calculated present values.3. Subtract the cash investment at the start of the project (initial cash outflow).4. The result will be the projects’s net present value.CreateUse XYZ Entertainment Company’s 5-year Cash Flow projections for Project A and Project B to complete the Project 3 Answer Sheet. Include the following information:1. The net present value (NPV) of Project A The present value of cash inflow for year 1 The present value of cash inflow for year 2 The present value of cash inflow for year 3 The present value of cash inflow for year 4 The present value of cash inflow for year 52. The net present value (NPV) of Project B The present value of cash inflow for year 1 The present value of cash inflow for year 2 The present value of cash inflow for year 3 The present value of cash inflow for year 4 The present value of cash inflow for year 53. Which project has the highest net present value (Project A or Project B)?Submit Save your completed Project 3 Answer Sheet as a PDF document. Name your Project 3 Answer Sheet document as follows: LASTNAME_FIRSTNAME_Project3 Upload your file to LAO and Submit.