Two pastry chef friends want to develop a food processing business. Their new project involves significant investments necessary for an optimal quality both in terms of the safety of the cakes and their flavor. The latter have chosen to acquire premises located in the industrial zone of their city. In terms of equipment, they hesitate between two alternatives: buy new equipment or opt for second-hand equipment. They called on an investment and financing consulting firm. The consultant has already calculated the FCFs of the two projects which you will find in the table below.

The latter believes that it should be based on the VANG to decide between the two projects. Calculate project NGV with used equipment, project NGV with new equipment. Calculate the difference between these two values (used VANG equipment new VANG equipment) and enter this value in the box below. The figure should be rounded to the nearest euro. If the difference is negative, put the sign before the number.

Project FCFs with used equipment & Project FCFs with new equipment

Year

0

1

2

3

4

5

Used Equipment

-340000

77667

125000

154333

453667

New equipment

-690000

116833

164167

193500

226167

538333

Additional information :

Project life with used equipment: 4 years

Lifetime of the project with new equipment: 5 years

Discount rate (WACC): 7.90%

. Reinvestment rate: 2%