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2. Langton Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable.
| 2. Langton Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the shorter discounted payback, some value may be forgone. How much value will be lost in this instance? | ||||||
| WACC | 6.25% | |||||
| Year | 0 | 1 | 2 | 3 | 4 | |
| Project S CF | -$930.00 | $600.00 | $700.00 | $100.00 | $50.00 | |
| Project L CF | -$2,050.00 | $400.00 | $600.00 | $700.00 | $1,200.00 | |
| Project S | ||||||
| Discounted CF | ||||||
| Cumulative Discounted CF | ||||||
| Discounted PaybackS | ||||||
| NPVS | ||||||
| Project L | ||||||
| Discounted CF | ||||||
| Cumulative Discounted CF | ||||||
| Discounted PaybackL | ||||||
| NPVL | ||||||
| Value Lost | ||||||
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Intermediate Accounting
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
10th Edition
978-0324300987
