Question: ABC Inc. is considering two mutually exclusive investment projects, each of which requires an up-front expenditure of $2,288,000.00. You estimate that the investments will produce
ABC Inc. is considering two mutually exclusive investment projects, each of which requires an up-front expenditure of $2,288,000.00. You estimate that the investments will produce the following net cash flows: Year 1 2 3 Project A $4,670,000 11,090,000 21,020,000 Project B $19,760,000 10,480,000 6,500,000 Which project should ABC Inc. choose , assuming the cost of capital is 11.00%? Choose Project A becasue NPVA > NPVg by $3,028,779.39. Choose Project B becasue NPVB > NPVA by $2,408,127.87. Choose Project A becasue NPVA > NPVg by $2,010,910.9. Choose Project B becasue NPVB > NPVA by $2,482,606.05. Choose Project A becasue NPVA > NPVg by $2,805,344.84
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