Question
The expected cash flows from 2 mutually exclusive projects, A and B, are as follows. Project A Year Cash flow 0 -20.000 1 + 5000
The expected cash flows from 2 mutually exclusive projects, A and B, are as follows.
Project A
Year | Cash flow |
0 | -20.000 |
1 | + 5000 |
2 | +5000 |
3 | +10.000 |
Project B
Year | Cash flow |
0 | -20.000 |
1 | + 5.000 |
2 | +2.000 |
3 | -1.000 |
4. | +14.000 |
If the initial investment for both projects is $20,000 and a company will only invest in one of them, which project should it choose?
A. Draw the Cash Flow Chart for the table below. Suppose i = 8%
B. Decide using current value analysis technique. Show all the steps of your decision.
Step by Step Solution
3.51 Rating (151 Votes )
There are 3 Steps involved in it
Step: 1
A The Cash Flow Chart for the given cash flows can be represented as follows Project A Year 0 20000 ...
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Step: 2
Step: 3
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Intermediate Financial Management
Authors: Eugene F. Brigham, Phillip R. Daves
11th edition
978-1111530266
