Question
Fast Food Restaurant (FF) has two mutually exclusive investment projects (A & B) to evaluate; both can be repeated indefinitely. Both projects are equally risky
Fast Food Restaurant (FF) has two mutually exclusive investment projects (A & B) to evaluate; both can be repeated indefinitely. Both projects are equally risky and may be repeated indefinitely. The firms WACC is 6%
19. Which of the below choices is the most CORRECT? *
A) NPV of project A is higher than the NPV of project B by $965.3
B) NPV of project B is higher than the NPV of project A by $965.3
C) Project B is more profitable than project A.
D) Choices (B) and (C).
E) None of the above.
20. Which of the two projects adds the most value to the firm? *
A) Project B adds more value to the firm than project A since the EAA of project B is greater than the EAA of project A.
B) Project A adds more value to the firm than project B since the EAA of project A is greater than the EAA of project B.
C) Both projects can be accepted by the company.
D) None of the above.
Time Project A Project B 0 1 90,000 25,000 25,000 40,000 125,000 40,000 35,000 30,000 30,000 12,000 4 5Step by Step Solution
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