XYZ Corporation is considering two mutually exclusive projects, Project A and Project B. The cash flows for
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XYZ Corporation is considering two mutually exclusive projects, Project A and Project B. The cash flows for each project are shown in the table below. The cost of capital for XYZ Corporation is 12%. Which project should the company choose based on the net present value (NPV) method? Show all calculations and provide a justification for your answer.
Year | Project A Cash Flow | Project B Cash Flow |
---|---|---|
0 | -$800,000 | -$1,200,000 |
1 | $400,000 | $500,000 |
2 | $400,000 | $500,000 |
3 | $400,000 | $500,000 |
4 | $400,000 | $500,000 |
5 | $400,000 | $500,000 |
Related Book For
Financial Management Theory and Practice
ISBN: 978-1305632295
15th edition
Authors: Eugene F. Brigham, Michael C. Ehrhardt
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