Homework Answers
Solution:
a)Statement showing calculation of relevant cash flows:
| Year | Relevant cash flows(Project A-Project B) |
| 0 | ($4652,000-$1542,000)=-$3110,000 |
| 1 | ($558,000-$376,000)=$182,000 |
| 2 | ($934000-$376000)=$558,000 |
| 3 | ($1344,000-$376000)=$968,000 |
| 4 | ($2221,000-$376,000)=$1845,000 |
| 5 | ($3396,000-$376,000)=$3020,000 |
b)Expansion decision such as Project A is viewed as a special form of replacement decision because in some way the expansion decision is a replacement decision where the cash flows from the old project are ZERO.
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I cant move to other questions before answering this one
first....
Relevant cash flow and timeline depiction For each of the following projects, determine the relevant cash flows, and depict the cash flows on a time line. a. A project that requires an initial investment of $116,000 and will generate annual operating cash inflows of $29,000 for the next 18 years. In each of the 18 years, maintenance of the project will require a $5,500 cash outflow. b. A new...
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