Chapter $11.$ The Basics of Capital Budgeting

You recently went to work for Allied Components Company, a supplier of auto repair parts used in the after$-$market with products from Daimler AG$,$ Ford, Toyota, and other automakers.

Your boss, the chief financial officer $($CFO$),$ has just handed you the estimated cash flows for two proposed projects. Project L involves adding a new item to the firm's ignition system line; it would take some time to build up the market for this product, so the cash inflows would increase over time. Project $S$ involves an add$-$on to an existing line, and its cash flows would decrease over time. Both projects have $3-$year lives because Allied is planning to introduce entirely new models after $3$ years.

Here are the projects'after$-$tax cash flows $($in thousands of dollars$)$:

$\backslash$table$[[$Year$,C{F}_L,C{F}_S$