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Creative Furniture is considering two mutually exclusive projects that would automate part of their production facilities. Project A costs $120,000 and would produce net cash
Creative Furniture is considering two mutually exclusive projects that would automate part of their production facilities. Project A costs $120,000 and would produce net cash flows of $37,000 annually for 5 years. Project B also costs $120,000 and will produce annual net cash flows of $25,000 for 10 years. Creative's cost of capital is 11%. Using a replacement chain, which project should be chosen? Assume that in 5 years, Project A will still cost $120,000 and produce 5 more years of $37,000 annual net cash flows
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