Question
John is making a decision whether goinf forward with a project which has NPV of $2.5 million, operating for 6.75 year or another second project.
John is making a decision whether goinf forward with a project which has NPV of $2.5 million, operating for 6.75 year or another second project. The second project has the similar overall risk with the first one and it is expected to generate NPV of $2 million in total and will operate for 3 years.
The cost of capital discount rate is 12% (Effective Annual Rate).
Question: If both projects are mutually exclusive projects, which project should John choose?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To determine which project John should choose we can compare the Net Present Values NPVs of the two ...
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Step: 2
Step: 3
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Making Hard Decisions with decision tools
Authors: Robert Clemen, Terence Reilly
3rd edition
538797576, 978-0538797573
