Question
Sandia corporation is considering two mutually exclusive projects. For our purposes, we will call them projects A and B. Project A is expected to cost
Sandia corporation is considering two mutually exclusive projects. For our purposes, we will call them projects A and B. Project A is expected to cost $51,918, and project B is expected to cost $52,978. Each project's expected cash flows are presented below. Both project A and B have similar risks to all other projects at Sandia. And the weighted average cost of capital for Sandia is 9.40%. Calculate the net present value of both projects, and enter in the box below how much the value of the firm is expected to increase based on this capital budget (please enter the amount to the nearest penny).
Project A | Project B | |
Year 1 | $8,135 | $7,873 |
Year 2 | $12,918 | $13,648 |
Year 3 | $12,866 | $10,589 |
Year 4 | $11,934 | $10,471 |
Year 5 | $15,452 | $15,368 |
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