Question
The Meacham Tire Company is considering two mutually exclusive projects with useful lives of 3 and 6 years. The after-tax cash flows for projects S
- The Meacham Tire Company is considering two mutually exclusive projects with useful lives of 3 and 6 years. The after-tax cash flows for projects S and L are listed below.
| Year | Cash Flow S | Cash Flow L |
| 0 | -$60,000 | -$115,000 |
| 1 | 38,000 | 28,500 |
| 2 | 25,000 | 49,500 |
| 3 | 35,000 | 26,850 |
| 4 |
| 22,600 |
| 5 |
| 18,750 |
| 6 |
| 23,500 |
The required rate of return on these projects is 14-percent. What decision should be made (i.e., which project should be accepted, if indeed any project should be accepted?
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Financial Markets and Institutions
Authors: Anthony Saunders, Marcia Cornett
6th edition
9780077641849, 77861663, 77641841, 978-0077861667
