A company is considering two projects. The discount rate is 10 percent, and the projects’ cash flows would be: Years 0 1 2 3 Project A -$700 $500 $300 $100 Project B -$700 $100 $300 $600 Calculate the projects’ NPVs. If the two projects are independent, which project(s) should be chosen? If the two projects are mutually exclusive, which project should be chosen?
A company is considering two projects. The discount rate is 10 percent, and the projects’ cash flows would be: Years 0 1 2 3 Project A -$700 $500 $300 $100 Project B -$700 $100 $300 $600 Calculate the projects’ NPVs. If the two projects are independent, which project(s) should be chosen? If the two projects are mutually exclusive, which project should be chosen?
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 7P
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A company is considering two projects. The discount rate is 10 percent, and the projects’ cash flows would be:
Years |
0 |
1 |
2 |
3 |
Project A |
-$700 |
$500 |
$300 |
$100 |
Project B |
-$700 |
$100 |
$300 |
$600 |
- Calculate the projects’ NPVs.
- If the two projects are independent, which project(s) should be chosen?
- If the two projects are mutually exclusive, which project should be chosen?
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