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17 Project ABC and Project XYZ are dependent (contingent) projects. The projects have the following characteristics: ABC requires an initial investment of $105,000 and generates
17
Project ABC and Project XYZ are dependent (contingent) projects. The projects have the following characteristics: ABC requires an initial investment of $105,000 and generates free cash flows of $35,000 each year for the coming 3 years; XYZ requires an initial investment of $20,000 and generates $6,000 free cash flows each year for the coming 6 years. The discount rate for both projects is 14%. Which of the following statement is true? O a Reject both projects because they are contingent projects and the total NPV is negative. O b. Only accept Project XYZ because only XYZ has a positive NPV. Cannot be determined because the two projects have different investment life. O c. O d. Accept both projects because they are contingent projects and the total NPV is positive. O e. Only accept Project ABC because the investment life of Project XYZ is too long Step by Step Solution
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