Question
Here are the cash-flow forecasts for two mutually exclusive projects: Cash Flows (dollars) Year Project A Project B 0 114 114 1 44 63 2
Here are the cash-flow forecasts for two mutually exclusive projects:
Cash Flows (dollars) | |||||||
Year | Project A | Project B | |||||
0 | 114 | 114 | |||||
1 | 44 | 63 | |||||
2 | 64 | 63 | |||||
3 | 84 | 63 | |||||
a-1. What is the NPV of each project if the opportunity cost of capital is 4%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
a-2. Which project would you choose?
b-1. What is the NPV of each project if the opportunity cost of capital is 15%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b-2. Which would you choose?
A forklift will last for only 2 more years. It costs $6,600 a year to maintain. For $21,000 you can buy a new lift that can last for 10 years and should require maintenance costs of only $3,600 a year.
a-1. Calculate the equivalent cost of owning and operating the forklift if the discount rate is 6% per year. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
a-2. Should you replace the forklift?
b-1. Calculate the equivalent cost of owning and operating the forklift if the discount rate is 15% per year. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b-2. Should you replace the forklift?
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