Projects A and B are mutually exclusive and have an initial cost of $78,000 each. Project A has annual cash flows for Ye
Posted: Thu May 19, 2022 6:15 am
Projects A and B are mutually exclusive and have
an initial cost of $78,000 each. Project A has annual cash flows
for Years 1 to 3 of $71,000 17,00, and $5,000,
respectively. Project B has annual cash flows for
Year 1 of $15,000 and $87,000 for Year 2.
a) What is the NPV of the project at 12%? What is
the IRR? Which project would you select? If there is a cross-over
rate, estimate it.
b) Which project would you select using the NPV
method at 12% after adjusting for the unequal lives?
an initial cost of $78,000 each. Project A has annual cash flows
for Years 1 to 3 of $71,000 17,00, and $5,000,
respectively. Project B has annual cash flows for
Year 1 of $15,000 and $87,000 for Year 2.
a) What is the NPV of the project at 12%? What is
the IRR? Which project would you select? If there is a cross-over
rate, estimate it.
b) Which project would you select using the NPV
method at 12% after adjusting for the unequal lives?