Question
If Worldwide Widget Manufacturing Inc., wants to add two new production lines of widgets. You're asked to analyze whether to go forward with two mutually
If Worldwide Widget Manufacturing Inc., wants to add two new production lines of widgets. You're asked to analyze whether to go forward with two mutually exclusive projects. The cash flows of both projects are displayed below. Your company uses a cost of capital of 9 percent to evaluate projects such as the two you're now analyzing. Show all calculations.
Year:012345Project A Cash flow-$1,000$150$300$500$300$250
Project B Cash Flow-$1,400$300$470$200$600$350
Using the NPV method and assuming a cost of capital of 6 percent, calculate the NPV of these two projects. Which of these mutually exclusive projects should the company accept?
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