Question: Leung Corporation is considering investing in two different projects It

Leung Corporation is considering investing in two different projects. It could invest in both, neither, or just one of the projects. The forecasts for the projects are as follows.


The required rate of return acceptable to Leung is 9%.

Instructions
(a) Compute the net present value of the two projects.
(b) What capital budgeting decision should Leung make?
(c) Project A could be modified. By spending $25,000 more initially, the net annual cash flows could be increased by $10,000 per year. Would this change Leung’sdecision?
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  • CreatedJanuary 30, 2014
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