Cosmic Investments can accept either capital expenditure proposal A or B (but not both), or it can

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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?

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Accounting Information For Business Decisions

ISBN: 9780170253703

2nd Edition

Authors: Billie Cunningham, Loren A. Nikolai, John Bazley, Marie Kavanagh, Geoff Slaughter, Sharelle Simmons

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