A firm has invested in and is currently receiving benefits from project A. The current value of

Question:

A firm has invested in and is currently receiving benefits from project A. The current value of project A is $4M. In next five years, the firm will have the option to use most of the same equipment from project A and switch to project B. Switching over would entail a $2M investment cost. The expected net cash inflow of project B is $1M per annum for 10 years. What is the total value of this investment scenario? Assume that = 12%, r = 6%, and a = 50%. MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...