Question: ABC Telecom has to choose between two mutually exclusive projects. If it chooses project A, ABC Telecom will have the opportunity to make a similar


ABC Telecom has to choose between two mutually exclusive projects. If it chooses project A, ABC Telecom will have the opportunity to make a similar nvestment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table lists the ash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present alue (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 14%? Cash Flow Project A Year 0: Year 1: Year 2: Year 3: Project B Year 0: Year 1: Year 2: Year 3: Year 4: Year 5: Year 6: -$40,000 $9,000 $13,000 $12,000 $11,000 $10,000 $9,000 -$12,500 $8,000 $14,000 $13,000 $21,754 $18,491 $15,228 $14,140 $13,052
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