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Global has two projects, A and B, which are mutually exclusive. The cash flows of each project are as follows. Project A: -$50, -$35, $25,
Global has two projects, A and B, which are mutually exclusive. The cash flows of each project are as follows.
Project A: -$50, -$35, $25, $150, $180, $135 in years 0, 1, 2, 3, 4, 5
Project B: -$100, -$60, $50, $350 in years 0, 1, 2, 3
Moreover, the details of Global are as follows:
1. Global uses 40% debt and 60% equity
2. Cost of debt = 9% per year
3. Cost of equity = 16% per year
4. Tax rate = 21%
ACCORDING TO THE NPV RULE, WHICH PROJECTS SHOULD YOU ACCEPT?
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