Read the question carefully and give me right solution according to the question. Cash flows of two mutually exclusive projects are'as follows.Project A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be$30,000 per year.Project B has initial cost of $120,000, an operating cost of $8,000 per year, and a $40,000 salvage value after its 3-year life.Assume the interest rate is 10% per year. Which of the following statements is true?The present worth of project B is -$109,842.22.The present worth of project A is -$143,252.17.O Project A should be selected.Two projects have different life cycle.

In this we have to calculate present value of all cost.

Answered: t rat of p of p sele

Business

Finance

t rat of p of p sele

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...

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Question

Read the question carefully and give me right solution according to the question.

Cash flows of two mutually exclusive projects are'as follows.
Project A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be
$30,000 per year.
Project B has initial cost of $120,000, an operating cost of $8,000 per year, and a $40,000 salvage value after its 3-year life.
Assume the interest rate is 10% per year. Which of the following statements is true?
The present worth of project B is -$109,842.22.
The present worth of project A is -$143,252.17.
O Project A should be selected.
Two projects have different life cycle.

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