A firm has two mutually exclusive investment projects to evaluate. The projects have the following cash flows:
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Question:
A firm has two mutually exclusive investment projects to evaluate. The projects have the following cash flows:
Time | After-tax Cash Flow X | After-tax Cash Flow Y |
0 | -$90,000 | -$75,000 |
1 | 40,000 | 40,000 |
2 | 50,000 | 40,000 |
3 | 65,000 | 40,000 |
4 | - | 40,000 |
5 | - | 5,000 |
Projects X and Y are equally risky and may be repeated indefinitely. If the firm's WACC is 11%, what is the EAA of the project that adds the most value to the firm? Do not round intermediate calculations. Round your answer to the nearest dollar.
Choose Project -Select-XYItem 1 , whose EAA = $
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