Question
Which project will you choose? Use the following information to answer the next THREE questions. A company is analyzing two mutually exclusive projects, S and
Which project will you choose? Use the following information to answer the next THREE questions. A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below:
Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | |
Cashflow for S | -100 | 40 | 50 | 30 | 30 |
Cashflow for L | -150 | 10 | 10 | 50 | 200 |
Assume the company can get an unlimited amount of capital at that cost.
WACC | NPV (S) | NPV (L) |
5% | ||
10% | ||
15% | ||
17% | ||
20% |
If the companys cost of capital is 15%, what is the net present value of each Project? Based on NPV, which project will you choose?
PLEASE SHOW WORK AND EXPLAIN, THANKS
Select one:
a. NPVS = $100.81, NPVL = $112.45, L
b. NPVS = $33.35, NPVL = $63.24, L
c. NPVS = $82.26, NPVL = $75.63, L
d. NPVS = $20.72, NPVL = $41.52, S
e. NPVS = $9.47, NPVL = $13.48, L
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