Question: The table below presents data for two projects you are contemplating undertaking. These two projects perform the same essential purpose. They involve the acquisition of
The table below presents data for two projects you are contemplating undertaking. These two projects perform the same essential purpose. They involve the acquisition of a special machine to make French Crpes, a very light and delicate pancake. Both projects require an initial investment of $85,000. The cash flows associated with these projects are given in the table below. Your required rate of return is 12% per annum. Year Project L ($) Project S ($) 11 30,000 35,000 35,000 40,000 3 50,000 55,000 2. 4 65,000 50,000 5 -40,000 30,000 16 40,000 10,000 7 -20,000 20,000 Question 12. Now assume that Project L and Project S do not perform the same function, meaning they are not perfect substitutes for each other. Would this change your decision? How? (no calculations are needed here) (2 marks)
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