Question
If Worldwide Widget Manufacturing Inc., wants to add two new production lines of widgets. Youre asked to analyze whether to go forward with two mutually
If Worldwide Widget Manufacturing Inc., wants to add two new production lines of widgets. Youre 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 youre now analyzing. Show all calculations.
| Year: | 0 | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|---|
| Project A Cash flow | -$1,000 | $150 | $300 | $500 | $300 | $250 |
| Project B Cash Flow | -$1,400 | $300 | $470 | $200 | $600 | $350 |
Calculate th epayback of Project A:
Calculate the payback of Project B:
Calculate the IRR of Project A:
Calculate the IRR of Project B
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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Banking Secrecy And Global Finance
Authors: Donato Masciandaro, Olga Balakina
1st Edition
1137400099, 978-1137400093
