Week 4 Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the same start-up costs. Project A will produce annual cash flows of $42,000 at the beginning of each year for eight years. Project B will produce cash flows of $48,000 at the end of each year for seven years. The company requires a 12% return. Required: Which project should the company select if the interest rate is 14% at the cash flows in Project B is also at the beginning of each year?
Week 4 Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the same start-up costs. Project A will produce annual cash flows of $42,000 at the beginning of each year for eight years. Project B will produce cash flows of $48,000 at the end of each year for seven years. The company requires a 12% return. Required:
Which project should the company select if the interest rate is 14% at the cash flows in Project B is also at the beginning of each year?
Annuity refers to series of equalized payments that are paid or received at start or ending of specific period over constant time period. It is either used as recovery or accumulation of lump-sum amount (Sinking-Fund) considering compounding factor.
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