Question
Consider two mutually exclusive projects with the following cash flows: Project A Project B Time 0 -10,000 -10,000 Time 1 5,000 4,000 Time 2 5,000
Consider two mutually exclusive projects with the following cash flows:
|
| Project A | Project B |
| Time 0 | -10,000 | -10,000 |
| Time 1 | 5,000 | 4,000 |
| Time 2 | 5,000 | 3,000 |
| Time 3 | 2,000 | 6,000 |
At a cost of capital of 8%, which project should the company choose? Explain which decision rule you should use in this case. (6 marks)
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
12th Edition
978-0030243998, 30243998, 324422695, 978-0324422696
