Old MathJax webview

. Recalculate question 11 with the following modifications: Project A: Add a residual value of $100,000 in year 10. Project B: Add a residual value of $60,000 in year 10. Project C: Move the residual value from the ninth year to the tenth year. a. At a 16% cost of capital and using an appropriate decision-making technique, recommend which project should be selected. How much better is the chosen alternative over the worst alternative? b. If a new lower cost of capital equal to 11% is used, what decision do you reach

Challenge, Critical Thinking, & Other Applications 11. The following projects are available, but only one can be chosen. The cost of capital in all cases is 16%. Project A: An initial investment of $180,000 followed by profits of $30,000 in years one to four, $40,000 in years five to seven, and $50,000 in years eight to ten. Project B: An initial investment of $335,000 followed by profits of $65,000 in years one to three, $85,000 in years four to six, and $110,000 in years seven to eight. Project C: An initial investment of $372,000 followed by profits of $150,000 in ycars four to nine and a residual value of $70,000 in the ninth year. Using an appropriate decision-making technique, recommend which project should be selected. How much better is the chosen alternative over the worst alternative? b. If a new lower cost of capital equal to 11% is used, what decision do you reach? 12. Recalculate question 11 with the followin a