Question: The Dickerson PR Firm is considering two mutually exclusive projects with useful lives of 3 and 6 years. The after-tax cash flows for projects S
The Dickerson PR Firm is considering two mutually exclusive projects with useful lives of 3 and 6 years. The after-tax cash flows for projects S and L are listed below.
| Year | Cash Flow S | Cash Flow L |
| 0 | -$60,000 | -$51,500 |
| 1 | 40,000 | 13,000 |
| 2 | 20,000 | 19,000 |
| 3 | 17,000 | 11,000 |
| 4 | 20,000 | |
| 5 | 10,000 | |
| 6 | 8,000 |
Required: Calculate the equivalent annual annuity for each project assuming a required return of 15%. What decision should be made?
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