Question
1. The Nelson Company is considering two mutually exclusive projects. The projected cash flows are as follows: Year Cash Flow A Cash Flow B 0
1. The Nelson Company is considering two mutually exclusive projects. The projected cash flows are as follows:
| Year | Cash Flow A | Cash Flow B |
| 0 | -$280,000 | -$250,000 |
| 1 | $60,500 | $50,000 |
| 2 | $75,000 | $35,000 |
| 3 | $80,000 | $70,000 |
| 4 | $95,000 | $150,000 |
a. The company uses a discount rate of 8%. Should the company go ahead with either project? Why or why not?
b. If the companys discount rate is 4.5%, should it go ahead with either project and if so which is the better one?
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Advanced Modelling In Mathematical Finance
Authors: Jan Kallsen, Antonis Papapantoleon
1st Edition
3319458736, 978-3319458731
