Question

Use the Internet to research two (2) mutually exclusive investment projects to compare. The projects may involve any kind of investment, as long as the time frame for one (1) of the investments is a maximum of one (1) year (short term) and the time frame for the other investment is five (5) years minimum (long term). Be prepared to discuss

Answer 1

There area unit 2 comes of a corporation that area unit reciprocally exclusive to every alternative. reciprocally exclusive comes mean those comes that can't be undertaken at the same time. they need to be obsessed one when the opposite. Project A contains a money outlay of $6,500 and a period of time of five years whereas Project B contains a money outlay of $17,000 however a period of time of one year. Project A has web annual advantages of $2,000 throughout annually of its 5-year helpful life, when that it will be replaced identically. Project B has web annual advantages of $3,000 for the one year solely. Project A has five years for ill the money outlay of the project whereas Project B has one year solely.

It is usually a choice to be taken by the manager of a corporation supported capital budgeting. Techniques like NPV and IRR area unit wont to decide whether or not a project is best than the opposite or not. Moreover, once examination 2 reciprocally exclusive comes that have unequal project lives, the prices of the comes, the outlays and therefore the annual prices of the comes should be analysed. Also, just in case of such comes, the project with the best expected NPV ought to be hand-picked. Sometimes, NPV and IRR might offer contradictory results because of that choosing between the 2 comes might become tough. Generally, the businesses choose NPV in such things. In terms of IRR, a project is suitable only if the interior Rate of come of the Project is a smaller amount than the chance price of capital.

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