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Projects A and B are mutually exclusive and have an initial cost of $78,000 each. Project A has annual cash flows for Years 1 to
| Projects A and B are mutually exclusive and have an initial cost of $78,000 each. Project A has annual cash flows for Years 1 to 3 of $71,000 17,00, and $5,000, | ||||||||||||||
| respectively. Project B has annual cash flows for Year 1 of $15,000 and $87,000 for Year 2. | ||||||||||||||
| a) What is the NPV of the project at 12%? What is the IRR? Which project would you select? If there is a cross-over rate, estimate it. | ||||||||||||||
| b) Which project would you select using the NPV method at 12% after adjusting for the unequal lives? | ||||||||||||||
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Managerial Finance
Authors: Alan Parkinson
1st Edition
0750618264, 978-0750618267
