Question
A company needs to decide if it will move forward with two new products that it is evaluating.The two initiatives have the following cash flow
A company needs to decide if it will move forward with two new products that it is evaluating.The two initiatives have the following cash flow projections:
Project A:
Year: 0 1 2 3 4
Cash flow: -800,000 220,000 265,000 292,000 317,000
Project B:
Year: 0 1 2 3 4 5
Cash Flow: -650,000 175,000 175,000 175,000 175,000 175,000
Based on the risk of each project, the company has a required rate of return of 11% for Project A and 11.5% for Project B.The company has a $1.5 million budget to spend on new projects for the year.Should the company move forward with one, both, or neither of the two new products?Show your work to support your answer.
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