Question
Year Proj Y Proj Z 0 ($210,000) ($210,000) 1 200,000 95,000 2 95,000 78,000 3 73,000 4 87,500 The projects provide a necessary service, so
| Year | Proj Y | Proj Z |
| 0 | ($210,000) | ($210,000) |
| 1 | 200,000 | 95,000 |
| 2 | 95,000 | 78,000 |
| 3 | 73,000 | |
| 4 | 87,500 |
The projects provide a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have an 12% cost of capital.
8. Now apply the replacement chain approach to determine the shorter projects extended NPV. Which project should be chosen?
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Foundations Of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
17th Edition
126001391X, 978-1260013917
