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PepsiCo Inc. is evaluating two investment options for its manufacturing plants: Option A requires an initial investment of $800 million and generates annual cash flows
PepsiCo Inc. is evaluating two investment options for its manufacturing plants:
- Option A requires an initial investment of $800 million and generates annual cash flows of $200 million for the next five years.
- Option B requires an initial investment of $1 billion and generates annual cash flows of $250 million for the next six years. If PepsiCo's required rate of return is 10%, which option should they choose based on the net present value method?
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