Calculate the initial cash flows (CF0) for the following projects. Which project has a larger CF0? a.

Question:

Calculate the initial cash flows (CF0) for the following projects. Which project has a larger CF0?

a. Project A: equipment purchase price = $200,000; installation cost = $5,000; extra working capital requirement = $50,500

b. Project B: machine purchase price = $120,500; shipping cost = $10,000; decrease in working capital = $20,000; opportunity cost = $80,500

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...