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A firm is considering two mutually exclusive projects. Project A has an initial cost of $ 1 5 0 , 0 0 0 ( CF
A firm is considering two mutually exclusive projects. Project A has an initial cost of $CF and produces positive aftertax cash inflows of $ a year at the end of each of the next years. Project B has an initial cost of $CF and produces aftertax cash inflows of $ a year at the end of the next years. If we assume that both projects can be replaced to repeat. The companys cost of capital is What is the most profitable project?
Use the Replacement Chain Approach. Note: Repeat Project A for times and repeat Project B for times.
Use the Equivalent Annual Annuity EAA analysis.
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