Cosmic Investments can accept either capital expenditure proposal A or B (but not both), or it can
Question:
Cosmic Investments can accept either capital expenditure proposal A or B (but not both), or it can reject both proposals. Proposal A requires an investment of \(\$ 1400\) and promises increased net cash inflows of \(\$ 440\) for each of the next five years. Proposal B requires an investment of \(\$ 1400\) and promises increased net cash inflows of \(\$ 460\) per year for the next four years and \(\$ 200\) in the fifth year. The business' required rate of return is 20 per cent.
Required:
a Prepare an analysis to determine which (if either) of the proposals should be selected for investment.
b How would your answer to
(a) be altered if one of the two proposals must be selected?
Step by Step Answer:
Accounting Information For Business Decisions
ISBN: 9780170253703
2nd Edition
Authors: Billie Cunningham, Loren A. Nikolai, John Bazley, Marie Kavanagh, Geoff Slaughter, Sharelle Simmons