Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$300,000 -$405,000 1 -387,000 134,000 2 -193,000 134,000 3 -100,000 134,000 4 600,000 134,000 5 600,000 134,000 6 850,000 134,000 7 -180,000 0 Assuming a cost of capital of 12%, which of these projects should be accepted?

Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter11: The Basics Of Capital Budgeting
Section: Chapter Questions
Problem 11P: CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS Project S costs 17,000, and its expected...
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Capital Budgeting

 

Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these.

 

 

Time

Project A Cash Flows

Project B Cash Flows

0

-$300,000

-$405,000

1

-387,000

134,000

2

-193,000

134,000

3

-100,000

134,000

4

600,000

134,000

5

600,000

134,000

6

850,000

134,000

7

-180,000

0

 

 

  1. Assuming a cost of capital of 12%, which of these projects should be accepted?
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