Question
You are considering three projects, but you only have funds for one. 0 1 2 3 4 5 6 7 A -1000 1400 B -1000
You are considering three projects, but you only have funds for one.
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| 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| A | -1000 | 1400 |
|
|
|
|
|
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| B | -1000 | 378.34 | 378.34 | 378.34 | 378.34 | 378.34 | 378.34 |
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| C | -1000 | 257.89 | 257.89 | 100 | 500 | 500 | 500 | 100 |
The cost of capital for projects A and B is 6%, and 5.35% for project C.
a. Which project should the company choose?
b. The companys accountant argues that the decision be made on the IRR for the projects. What are they? If you follow the accountants advice which project should you choose? Show work. Two decimals.
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Cost Of Capital Applications And Examples
Authors: Shannon P. Pratt, Roger J. Grabowski, Richard A. Brealey
5th Edition
1118555805, 9781118555804
