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A company is evaluating two mutually exclusive projects in which to invest. Project A needs an...

A company is evaluating two mutually exclusive projects in which to invest. Project A needs an investment of $300,000 and will deliver $160,000 in annual profits during its 8 years life. Project B needs an investment of $400,000 and will deliver $210,000 in annual profits during its 6 years life. Considering a Study Period of 6 years, and that project A can be sold for $200,000 at the end of the 6th year (because it will still have 2 years of productive life):

a) Type a table with the cash flows of projects A and B with the appropriate study period in order to compare them.

b)With the information of the previous question: Decide which project is more convenient, using Net Present Value using and a MARR of 12% per year. (Include calculation procedure using Interest factor notation)

Solutions

Expert Solution

Answer:

A.) Please find the attached image for cashflow comparison

B.) As Project-B has higher NPV compare to Project-A. So, Project B is more convenient.

Explanation:

Please find the attached images for the detailed explanation along with the formula.

Hope this helps. If you need further clarification let me know in the comment section.

All the best!

jeff jeffy answered 1 year ago
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