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United Airlines is considering purchase of two alternative planes. Plane A has an expected life of 5 years., will cost $100 million, and will result
United Airlines is considering purchase of two alternative planes. Plane A has an expected life of 5 years., will cost $100 million, and will result in net cash flow of $30 million every year. Plane B has a life span of 10 years, will cost $132 million, and will produce net cash flow of $25 million per year. United Airlines plan to serve the route only for 10 years. Inflation in operating costs, airline costs and fares are expected to be zero. The company's cost of capital is 12%. By how much would the value of the company increase if the company accepts the better project ( plane). $9.256 million $12.764 million \$8.143 million $3.508 million None of the above
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