My Best Company, MBC, wants to evaluate 2 possible projects and engage in the most profitable one.
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Question:
My Best Company, MBC, wants to evaluate 2 possible projects and engage in the most profitable one.
Project A requires $200,000 in initial investment and will generate $80,000profit every 6-month. MBC thinks that they can sell the project at the end of year 2 for$30,000. The other project,
Project B, requires less initial investment, $150,000, but has ahigher salvage value of $50,000. Project B generates $50,000 profit every 6-month and has a3-year lifetime. MBC requires a minimum rate of return equal to 12% compounded monthly.Which project should MBC choose?
Related Book For
Fundamentals of Investing
ISBN: 978-0133075359
12th edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
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