Chapter 14, Problem 7QA

Evaluating projects with unequal lives   Tasty Tuna Corporation is a U.S. firm that wants to expand its business internationally. It is considering potential projects in both Germany and Thailand, and the German project is expected to take six years, whereas the Thai project is expected to take only three years. However, the firm plans to repeat the Thai project after three years. These projects are mutually exclusive, so Tasty Tuna Corporation’s CFO plans to use the replacement chain approach to analyze both projects. The expected cash flows for both projects follow: Project: German Year 0: –$800,000 Year 1: $380,000 Year 2: $400,000 Year 3: $420,000 Year 4: $375,000 Year 5: $110,000 Year 6: $85,000   Project: Thai Year 0: –$475,000 Year 1: $225,000 Year 2: $235,000 Year 3: $255,000   If Tasty Tuna Corporation’s cost of capital is 10%, what is the NPV of the German project? a.)$535,797 b.)$563,997 c.)$507,597 d.)$451,198…