Mickey Ltd is considering two mutually-exclusive projects with the following details: Required: Calculate the ARR based on
Question:
Mickey Ltd is considering two mutually-exclusive projects with the following details:
Required:
Calculate the ARR based on the average investment for each project, and indicate which project should be chosen.
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Project A Initial investment Scrap value in year 5 Year: Annual cash flows ($000) Project B Initial investment $450,000 $20,000 1 2 3 4 5 200 150 100 100 100 Scrap value in year 5 $100,000 $10,000 Year: 1 2 3 4 Annual cash flows ($000) 50 40 30 20 20 52
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