Question
Ace, Inc. is considering Project A and Project B, which are two mutually exclusive projects with unequal lives. Project A is an eight-year project that
Ace, Inc. is considering Project A and Project B, which are two mutually exclusive projects with unequal lives. Project A is an eight-year project that has an initial outlay or cost of $18,000. Its future cash inflows for years 1 through 8 are the same at $3,800. Project B is a six-year project that has an initial outlay or cost of $14,000. Its future cash inflows for years 1 through 6 are the same at $3,600. Ace uses Annualized NPV method and has a discount rate of 11.50%. What are the ANPV of Projects A and B respectively and which project should Ace accept?
Question 13 options:
1211.42 and 1013.06; Ace should accept project A
1211.42 and 1013.06; Ace should accept project B
239.62 and 242.92; Ace should accept project B
ANPV does not help ACE to make a decision in this case
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