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hichkok12 [17]
4 years ago
11

Your company is considering two mutually exclusive projects. Project A has an initial cost of $80,000 and generates expected cas

h flows of $25,000 per year for six years. Project B has an initial cost of $80,000 and generates expected cash flows of $60,000 per year for two years. The firm's cost of capital is 12.00%. Determine which project you would choose.
Business
2 answers:
katovenus [111]4 years ago
8 0

Answer:

The company should accept Project B because it generates more value per year as compared to Project A.

Explanation:

Explanation can be seen in the file attached.

Download docx
maw [93]4 years ago
7 0

Answer:

Choose Project A

Explanation:

To choose between two mutually exclusive projects we will use two approaches NPV approach .

Under NPV accept project if NPV is positive and has higher NPV.

Project A NPV

-80 000 + 25000/1.12+25000/1.12^2+25000/1.12^3+25000/1.12^4+25000/1.12^5+25000/1.12^6 = -80000+22321.43+19929.85+17794.51+15887.95+14185.67+12665.78

          =$22,785.19

Project B NPV

- 80 000 + 60000/1.12 ^1+60000/1.12^2 = $21,403.06

Choose A as it has higher NPV.

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Explanation:

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When a negative real shock hits the economy, in the absence of any monetary intervention?
Reptile [31]

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Inflation can be defined as an increase in prices, which can be translated as a decrease in purchasing power over time. The rate of decline in people's purchasing power can be reflected in the increase in the average price of a selected basket of goods and services over a period of time. An increase in price, which is often expressed as a percentage, means that one unit of currency is effectively buying less than it did in the previous period. Inflation can be contrasted with deflation, which occurs when prices fall and people's purchasing power increases.

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2 years ago
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Mariana [72]
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3 years ago
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Lostsunrise [7]

Answer:

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Tomtit [17]

Answer:

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