Question: The Sky Limited is considering two alternative projects. Project A has an expected life of 5 years, will cost Sh 1 0 0 million, and
The Sky Limited is considering two alternative projects. Project A has an expected life of years, will cost Sh million, and will produce net cash flows of Sh million per year. Project B has a life of years, will cost Sh million, and will produce net cash flows of Sh million per year. The cost of capital is percent. Required: a If the projects cannot be repeated, which project should be selected if Sky uses Net Present Value NPV as its criterion for project selection? b Assume the projects can be repeated and that there are no anticipated changes in the cash flows. Use the replacement chain analysis to determine the NPV of the project selected.
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