9. Unequal project lives Globex Corp. has to choose between two mutually exclusive projects. If it...
4. Unequal project lives Galaxy Corp. has to choose between two mutually exclusive projects. If it chooses project A, Galaxy Corp. will have the opportunity to make a similar investment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table lists the cash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value...
Newtown Corp. has to choose between two mutually exclusive projects. If it chooses project A, Newtown Corp. will have the opportunity to make a similar investment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table lists the cash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A...
ABC Telecom has to choose between two mutually exclusive projects. If it chooses project A, ABC Telecom will have the opportunity to make a similar investment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table lists the cash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A...
13. Problem 12.13 (Unequal Lives) eBook Haley's Crockett Designs Inc. is considering two mutually exclusive projects. Both projects require an initial investment of $11,000 and are typical average-risk projects for the firm. Project A has an expected life of 2 years with after-tax cash inflows of $6,000 and $10,000 at the end of Years 1 and 2, respectively. Project B has an expected life of 4 years with after-tax cash inflows of $5,000 at the end of each of the...
6. The equivalent annual annuity approach - Evaluating projects with unequal lives Aa Aa E Evaluating projects with unequal lives Bidget Corp. is a Canadian firm that wants to expand its business internationally. It is considering potential projects in both Spain and Ukraine, and the Spanish project is expected to take six years, whereas the Ukrainian project is expected to take only three years. However, the firm plans to repeat the Ukrainian project after three years. These projects are mutually...
6. The equivalent annual annuity approach - Evaluating projects with unequal lives Aa Aa E Evaluating projects with unequal lives Your company is considering starting a new project in either Spain or Mexico-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 shareholders. The Spanish project is a six-year project that is expected to produce the following cash flows: The Mexican project...
You are trying to determine which of two mutually exclusive projects to undertake. Project Adam has an initial outlay of $10,000, an NPV of $4,392.15, an IRR of 11.33%, and an EAA of $1,158.64. Project Eve has an initial outlay of $15,000, an NPV of $5,833.73, an IRR of 9.88%, and an EAA of $1,093.50. The cost of capital for both projects is 9%, and the projects have different lives. If the projects are repeatable, then: You should do both...
You are trying to determine which of two mutually exclusive projects to undertake. Project Adam has an initial outlay of $10,000, an NPV of $4,392.15, an IRR of 11.33%, and an EAA of $1,158.64. Project Eve has an initial outlay of $15,000, an NPV of $5,833.73, an IRR of 9.88%, and an EAA of $1,093.50. The cost of capital for both projects is 9%, and the projects have different lives. If the projects are repeatable, then: You should do both...
You are trying to determine which of two none mutually exclusive projects to undertake. Project Adam has an initial outlay of $10,000, an NPV of $4,392.15, an IRR of 1 1.33%, and an EAA of $1,158.64. Project Eve has an initial outlay of $15,000, an NPV of $5,833.73, an IRR of 9.88%, and an EAA of $1 0 3.50 The cost of capital for both projects is 9%, and the prolects have different lives. If the projects are not repeatable,...
Axis Corp. is considering an investment in the best of two mutually exclusive projects. Project Kelvin involves an overhaul of the existing system; it will cost $35,000 and generate cash inflows of $20,000 per year for the next 3 years. Project Thompson involves replacement of the existing system; it will cost $220,000 and generate cash inflows of $50,000 per year for 6 years. Using a cost of capital of 11%, calculate each project's NPV, and make a recommendation based on...