Question
Farmer Co. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and repeatable. Years 0
Farmer Co. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and repeatable.
Years 0 1 2 3 4
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CFL -500 50 100 350 430
CFS -650 400 500
WACC: 15%
Given the two projects are of different length, one suggestion is to use the replacement
chain approach to compare them. If this approach is used, which project will you choose
and why? Show the calculations.
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Investments An Introduction
Authors: Herbert B. Mayo
12th edition
1305638417, 978-1337430937, 1337430935, 978-1305638419
