A company has 2 mutually exclusive projects to consider with the following information: Project A R120,000...

 

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A company has 2 mutually exclusive projects to consider with the following information: Project A R120,000 Project B R100,000 R40,000 Initial investment Incremental cash flow Year 1 Incremental cash flow Year 2 Incremental cash flow Year 3 Incremental cash flow Year 4 WACC = 12% a) What is the NPV of each project? b) Which project should the company choose? c) If Project A can be repeated, which project should the company proceed with? R50,000 R70,000 R40,000 R40,000 R40,000 A company has 2 mutually exclusive projects to consider with the following information: Project A R120,000 Project B R100,000 R40,000 Initial investment Incremental cash flow Year 1 Incremental cash flow Year 2 Incremental cash flow Year 3 Incremental cash flow Year 4 WACC = 12% a) What is the NPV of each project? b) Which project should the company choose? c) If Project A can be repeated, which project should the company proceed with? R50,000 R70,000 R40,000 R40,000 R40,000

Answer rating: 100% (QA)

a To calculate the NPV of each project we need to discount the incremental cash flows by the WACC The NPV of Project A is NPVA R120000 R50000 1 012 R4... View the full answer