Question: Q 23-25 A firm is considering two projects, A and B. Each project will last for 4 years. The projects are MUTUALLY EXCLUSIVE. The projected
Q 23-25
A firm is considering two projects, A and B. Each project will last for 4 years. The projects are MUTUALLY EXCLUSIVE. The projected cash flows for each project are shown below:
| Year | 0 | 1 | 2 | 3 | 4 |
|---|---|---|---|---|---|
| Project A | -19.00 | 9.00 | 8.00 | 6.00 | 4.00 |
| Project B | -30.00 | 10.00 | 12.00 | 11.00 | 11.00 |
The cost of capital facing the firm is 9.00%.
a] What is the NPV of project A at the cost of capital?
b] What is the NPV of project B at the cost of capital?
c] The projects are mutually exclusive. Using the NPV decision rule, what is your decision based on the results of part A and part B? (A, B, BOTH, or NONE)
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock