Question
The following projects are available, but only one can be chosen. The cost of capital in all cases is16%. Project A: An initial investment of
The following projects are available, but only one can be chosen. The cost of capital in all cases is16%.
Project A: An initial investment of $180,000 followed by profits of $30,000 in years one to four, $40,000 in years five to seven, and $50,000 in years eight to ten.
Project B: An initial investment of $335,000 followed by profits of $65,000 in years one to three, $85,000 in years four to six, and $110,000 in years seven to eight.
Project C: An initial investment of $372,000 followed by profits of $150,000 in years four to nine and a residual value of $70,000 in the ninth year.
Using an appropriate decision-making technique, recommend which project should be selected. How much better is the chosen alternative over the worst alternative?
If a new lower cost of capital equal to 11% is used, what decision do you reach?
pls solve it using the TI BI II calculator.
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