A company needs to decide if it will move forward with two new products that it is evaluating. The two initiatives have the following cash flow projections: Project A Year 0 1 2 3 4 Cash Flow -800,000 220,000 265,000 292,000 317,000 Project B Year 0 1 2 3 4 5 Cash Flow -650,000 175,000 175,000 175,000 175,000 175,000 Based on the risk of each project, the company has a required rate of return of 11% for Project A and 11.5% for Project B. The company has a $1.5 million budget to spend on new projects for the year. Should the company move forward with one, both, or neither of the two new products?
A company needs to decide if it will move forward with two new products that it is evaluating. The two initiatives have the following cash flow projections:
Project A
Year 0 1 2 3 4
Cash Flow -800,000 220,000 265,000 292,000 317,000
Project B
Year 0 1 2 3 4 5
Cash Flow -650,000 175,000 175,000 175,000 175,000 175,000
Based on the risk of each project, the company has a required
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
