Question
Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of
Capital Budgeting
Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these.
| Time | Project A Cash Flows | Project B Cash Flows |
| 0 | -$300,000 | -$405,000 |
| 1 | -387,000 | 134,000 |
| 2 | -193,000 | 134,000 |
| 3 | -100,000 | 134,000 |
| 4 | 600,000 | 134,000 |
| 5 | 600,000 | 134,000 |
| 6 | 850,000 | 134,000 |
| 7 | -180,000 | 0 |
- Under what conditions on the cost of capital should project B be preferred to project A?
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Principles Of Banking
Authors: Allyn C Buzzel
11th Edition
089982689X, 9780899826899
