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A company has to choose between two different investments. Investment A: This investment requires an immediate outlay of $60,000 and another Investment of $40,000 in
A company has to choose between two different investments.
Investment A: This investment requires an immediate outlay of $60,000 and another Investment of $40,000 in year 3. The investment will return annual profits of $40,000 from year 2 to year 8. At the end of year 8, the investment has a residual valua of $10,000.
Investment B: This investment requires an immediate outlay of $35,000 and additional investment of $15,000 per year from year 1 to year 3. The investment will return annual profits of $28,000 from year 4 to year 8. At the end of year 8, the investment has a residual value of $25,000.
The cost of capital is 8.5%.
a. Calculate the NPV for Investment A.
b. Calculate the NPV for Investment B.
Solve using financial calculator.
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A Financial Crisis Manual Reflections And The Road Ahead
Authors: Dimitrios D. Thomakos , Platon Monokroussos, Konstantinos I. Nikolopoulos
1st Edition
1137448296, 113744830X, 9781137448293, 9781137448309
