Question: Given the cashflows for the two projects, use 10% discount rate to determine the salvage value for Alternative 1 that make the two projects equivalent.

Given the cashflows for the two projects, use 10% discount rate to determine the salvage value for Alternative 1 that make the two projects equivalent. Hint: solve NPV for Alt 2, make that the NPV for Alt 1, and then solve for Salvage using Goal Seek. MUST show the Goal Seek entry box (screenshot). Also, review how to solve for NPV when there are unequal cashflows each yr. Finally, consider salvage during the 8th year.

Year 0 1 23456 7 8 Salvage Alternative 1 Alternative 2 -5000 -3000 200 300 400 500 600 700 800 900 500 500 500 500 500 500 500 1500 0

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