Question
1. The Avengers have been presented with two different plans (THOR and HULK). The projected cash flows are shown Table 1 below. The companys Weighted
1. The Avengers have been presented with two different plans (THOR and HULK). The projected cash flows are shown Table 1 below. The companys Weighted Average Cost of Capital (WACC) is 6 % per annum.
| THOR | HULK | |
| Year 0 (Cash outflow | ($20,000) | ($50,000) |
| Year 1 | $16,000 | $20,000 |
| Year 2 | $8,000 | $20,000 |
| Year 3 | $2,000 | $20,000 |
a) Calculate the Net Present Value (NPV) of THOR and HULK.
b) Based on your answer in part a), assuming that both projects are mutually exclusive, explain briefly which plan the Avengers should pick.
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Fundamentals Of Futures And Options Markets
Authors: Jonn C. Hull
8th International Edition
0133382850, 9780133382853
