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There are two unequal life time mutually exclusive alternative investments, A and B with following cash flow. Other opportunities exist at 12% minimum rate return.
There are two unequal life time mutually exclusive alternative investments, A and B with following cash flow. Other opportunities exist at 12% minimum rate return.
C=$150 | I=$55 | I=$50 | I=$45 | I=$40 | I=$35 | L=$150 | |
A) | |||||||
0 | 1 | 2 | 3 | 4 | 5 |
C=$100 | I=$50 | I=$45 | I=$40 | L=$100 | |
B) | |||||
0 | 1 | 2 | 3 |
C: Cost, I:Income, L:Salvage
Using ROR and NPV analysis, which investment is economically better? Please include the incremental analysis and show all your work.
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