Question
Vanderheiden Inc. is considering two average-risk alternative ways of producing its patented polo shirts. Process S has a cost of $8,000 and will produce net
Vanderheiden Inc. is considering two average-risk alternative ways of producing its patented polo shirts. Process S has a cost of $8,000 and will produce net cash flows of $5,000 per year for 2 years. Process L will cost $11,500 and will produce cash flows of $4,000 per year for 4 years. The company has a contract that requires it to produce the shirts for only 4 years. If cash inflows occur at the end of each year, and if its cost of capital is 10%, by what amount will the better project increase Vanderheiden's value?
a. $ 677.69
b. $1,098.89
c. $1,179.46
d. $1,237.76
e. $1,312.31
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