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Your company is considering starting a new project in either Germany or Ukraine-these projects are mutually exclusive, so your boss has asked you to analyze
Your company is considering starting a new project in either Germany or Ukraine-these projects are mutually exclusive, so your boss has asked you to analyze the projects and then tell her which project will create more value for the company's stockholders. The German project is a six-year project that is expected to produce the following cash flows: The Ukrainian project is only a three-year project; however, your company plans to repeat the project after three years. The Ukrainian project is expected to produce the following cash flows: Project: German Year 0: Year 1: Year 2: Year 3: Year 4: Year 5: Year 6: -$800,000 $380,000 $400,000 $420,000 $375,000 $110,000 $85,000 Project: Ukrainian Year 0: -$475,000 Year 1: $225,000 Year 2: $235,000 Year 3: $255,000 Because the projects have unequal lives, you have decided to use the replacement chain approach to evaluate them. You have determined that the appropriate cost of capital for both projects is 11%. Assuming that the Ukrainian project's cost and annual cash inflows do not change when the project is repeated in three years and that the cost of capital remains at 11%, fill out the following table: NPV German project: NPV Ukrainian project
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