Question: Galaxy Corp, has to choose between two mutually exclusive projects. If it chooses project A, Galaxy Corp, will have the opportunity to make a similar
Galaxy Corp, has to choose between two mutually exclusive projects. If it chooses project A, Galaxy Corp, will have the opportunity to make a similar Investment 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 cash flows for these projects. If the firm uses the replacement chain common fire) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 10%? Cash Flow Project A Year : - $45,000 10,000 Year 1: Project B Year 0 Year 1: Year 2: Year 3: -$12,500 8,000 14,000 13,000 Year 2: Year 3: Year 17,000 16,000 15,000 14,000 13,000 Year 5 Year 6 $7,066 $10.598 39,421 $12,954 $11.776 Galaxy Corp. is considering a four year project that has a welghted average cost of capital of 12% and a NPV of $29,567 Galaxy Corp, can replicate this project indefinitely What is the equivalent annual annuity (CAA) for this project>
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
