ZuoTi.Pro
Question

There are two ways to correct for projects with unequal lives when using the NPV approach....

There are two ways to correct for projects with unequal lives when using the NPV approach. Which of the answers below is one of these ways? A) One way is to find a common life, without the need to extend the projects to the least common multiple of their lives. B) One way is to find the present value factors and then compare them. C) One way is to compare the lengths of the projects and take the project with the shortest life. D) One way is to find a common life by extending the projects to the least common multiple of their lives.h

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

The correct option is - D) One way is to find a common life by extending the projects to the least common multiple of their lives.

A is incorrect. The project must be extended to the least common multiple of their lives.

B is incorrect. This does not take into account the unequal lives of the projects

C is incorrect. This does not select the project with the best value

0 0
Add a comment
Know the answer?
Add Answer to:
There are two ways to correct for projects with unequal lives when using the NPV approach....
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 15. The replacement chain approach - Evaluating projects with unequal lives Evaluating projects with unequal lives...

    15. The replacement chain approach - Evaluating projects with unequal lives Evaluating projects with unequal lives RTE Telecomm is a U.S. firm that wants to expand its business internationally. It is considering potential projects in both Italy and Ukraine, and the Italian 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 exclusive, so RTE Telecomm's...

  • 6. The equivalent annual annuity approach - Evaluating projects with unequal lives Aa Aa E Evaluating...

    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...

  • 6. The equivalent annual annuity approach - Evaluating projects with unequal lives Aa Aa E Evaluating...

    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...

  • 4. Unequal project lives Galaxy 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...

  • 9. Unequal project lives Globex Corp. has to choose between two mutually exclusive projects. If it...

    9. Unequal project lives Globex Corp. has to choose between two mutually exclusive projects. If it chooses project A, Globex 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...

  • 13. Problem 12.13 (Unequal Lives) eBook Haley's Crockett Designs Inc. is considering two mutually exclusive projects....

    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...

  • Unequal lives: ANPV approach JBL Co. has designed a new conveyor system. Man- agement must choose...

    Unequal lives: ANPV approach JBL Co. has designed a new conveyor system. Man- agement must choose among three alternative courses of action: (1) The firm can sell the design outright to another corporation with payment over 2 years; (2) it can li- cense the design to another manufacturer for a period of 5 years, its likely product life; or (3) it can manufacture and market the system itself, an alternative that will result in 6 years of cash inflows. The...

  • Unequal lives—ANPV approach Evans Industries wishes to select the best of three possible machines, each of...

    Unequal lives—ANPV approach Evans Industries wishes to select the best of three possible machines, each of which is expected to satisfy the firm's ongoing need for additional aluminum-extrusion capacity. The three machines A, B, and C-are equally risky. The firm plans to use a cost of capital of 11.2% to evaluate each of them. The initial investment and annual cash inflows over the life of each machine are shown in the following table. (Click on the icon located on the...

  • Unequal lives-ANPV approach Evans Industries wishes to select the best of three possible machines, each of...

    Unequal lives-ANPV approach Evans Industries wishes to select the best of three possible machines, each of which is expected to satisfy the firm's ongoing need for additional aluminum-extrusion capacity. The three machines-A, B, and C-are equally risky. The firm plans to use a cost of capital of 12.4% to evaluate each of them. The initial investment and annual cash inflows over the life of each machine are shown in the following table (Click on the icon located on the top-right...

  • Unequal lives-ANPV approach JBL Co. has designed a new conveyor system. Management must choose among three...

    Unequal lives-ANPV approach JBL Co. has designed a new conveyor system. Management must choose among three alternative courses of action: (1) The firm can sell the design outright to another corporation with payment over 2 years. (2) It can license the design to another manufacturer for a period of 5 ears, its likely product life. (3) It can manufacture and market the system itself, this alternative will result in 6 years of cash inflows. The company has a cost f...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT