Question
A company has been presented with the two investment opportunity. Project 1: The investment outlay is expected to be $200,000 in Year 0. After that,
A company has been presented with the two investment opportunity.
Project 1: The investment outlay is expected to be $200,000 in Year 0. After that, the project is expected to earn operating cash flows of $67,000 per year for the next 4 years.
Project 2: The investment outlay is expected to be $180,000 in Year 0. After that, the project is expected to earn operating cash flows of $58,000 per year for the next 4 years.
If your cost of capital is 9%, what are the NPV and IRR for both projects?
Using the projects in the previous question (#15), what should the firm do if the projects are independent? What should they do if the projects are mutually exclusive? Explain.
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Introduction to Finance Markets, Investments and Financial Management
Authors: Ronald W. Melicher, Edgar A. Norton
16th edition
1119398282, 978-1-119-3211, 1119321115, 978-1119398288
