Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Can someone solve this out for me? (b) A company considers two mutually exclusive projects with the following costs and revenues. The two projects are
Can someone solve this out for me?
(b) A company considers two mutually exclusive projects with the following costs and revenues. The two projects are expected to produce homogeneous units. A discount rate of 10% is chosen to evaluate the two projects. PROJECT A Year 0 1 2 3 5 Cost ($) 5000 5000 5000 5000 5000 0 Revenue 0 10000 40000 40000 30000 30000 PROJECT B Year 0 1 2 4 6 Cost ($) 5000 7000 1000 1000 2000 Revenue ($) 0 25000 50000 30000 25000 (i) Calculate the Net Present Value (NPV), and the Benefit-Cost Ratio (BCR) for the two projects and suggest the best project option. Explain fully your methods. (10 marks) (ii) Suppose project A has a fixed cost of $55,000 and project B has a fixed cost of $50,000. Use a suitable project appraisal technique taking into account the fixed cost and the differential life time of the two projects and clearly, compare the best option between A and B from (i). (10 marks)Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started