Question
Scale Differences The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $44 million on a large-scale,
Scale Differences The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of $44 million on a large-scale, integrated plant that will provide an expected cash flow stream of $6 million per year for 20 years. Plan B calls for the expenditure of $14 million to build a somewhat less efficient, more labor-intensive plant that has an expected cash flow stream of $2.7 million per year for 20 years. The firm's cost of capital is 9%.
Set up a Project by showing the cash flows that will exist if the firm goes with the large plant rather than the smaller plant.
Year | Project Cash Flows |
0 | $ |
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