Question
Western Dynamite Company is evaluating two new methods of blowing up buildings for commercial purposes over the next five years. Method 1 (implosion) is relatively
Western Dynamite Company is evaluating two new methods of blowing up buildings for commercial purposes over the next five years. Method 1 (implosion) is relatively low in risk for this business and will carry a 10 percent discount rate. Method 2 (explosion) is less expensive to perform, but it is more dangerous and will require a higher discount rate of 15 percent. Either method will require an initial capital outlay of $100,000. The inflows from projected business over the next five years are given below. Which method should be selected using NPV analysis?
Years Product 1 Product 2 $25,000 $28.000 30,000 32,000 38,000 39,000 4 31,000 33,000 19.000 25,000Step by Step Solution
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