Question
Question :1 (40%, 8% per sub question) A firm is evaluating two mutually exclusive projects that have unequal lives. The firm must evaluate the projects
Question :1 (40%, 8% per sub question) A firm is evaluating two mutually exclusive projects that have unequal lives. The firm must evaluate the projects using the annualized net present value approach and recommend which project they should select. The firm's cost of capital has been determined to be 14 percent, and the projects have the following initial investments and cash flows:
-
The NPVs of Projects R and S are
-
The annualized NPV of Project R is
-
The annualized NPV of Project S is
-
Which project should be chosen on the basis of the normal NPV approach?
-
Which project should be chosen using the Annualized NPV approach?
PROJECT R PROJECT S
INITIAL INVESTMENT 40,000 58,000
CASH FLOW. 1. 20,000 30,000
2. 20,000 55,000
3. 20,000
4. 20,000
PLEASE SHOW WORK FOR EACH QUESTION THANKS!!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started