Question
A company is considering the purchase of one of two mutually exclusive projects for improving its assembly line. The company plans to use a 12%
A company is considering the purchase of one of two mutually exclusive projects for improving its assembly line. The company plans to use a 12% cost of capital for evaluating these two equal-risk projects. The initial outlay and annual cash flows over the life of each project are shown in the following table:
| Year | 0 | 1 | 2 | 3 | 4 |
| L | -$130,000 | 35,000 | 5,500 | 62,000 | 81,000 |
| S | -$94,500 | 56,000 | 57,000 |
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Introduction to Corporate Finance What Companies Do
Authors: John Graham, Scott Smart
3rd edition
9781111532611, 1111222282, 1111532613, 978-1111222284
