6. A company has 2 mutually exclusive projects to consider with the following information: Project A R120,000 R50,000 R70,000 Initial investment Incremental cash flow Year 1 Incremental cash flow Year 2 Incremental cash flow Year 3 Incremental cash flow Year 4 WACC = 12% Project B R100,000 R40,000 R40,000 R40,000 R40,000 a) What is the NPV of each project? b) Which project should the company choose? c) If Project A can be repeated, which project should the company proceed with?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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6. A company has 2 mutually exclusive projects to consider with the following information:
Project A
R120,000
Project B
R100,000
R50,000
R40,000
R70,000
R40,000
R40,000
R40,000
Initial investment
Incremental cash flow Year 1
Incremental cash flow Year 2
Incremental cash flow Year 3
Incremental cash flow Year 4
WACC = 12%
a) What is the NPV of each project?
b) Which project should the company choose?
c)
If Project A can be repeated, which project should the company proceed with?
Transcribed Image Text:6. A company has 2 mutually exclusive projects to consider with the following information: Project A R120,000 Project B R100,000 R50,000 R40,000 R70,000 R40,000 R40,000 R40,000 Initial investment Incremental cash flow Year 1 Incremental cash flow Year 2 Incremental cash flow Year 3 Incremental cash flow Year 4 WACC = 12% a) What is the NPV of each project? b) Which project should the company choose? c) If Project A can be repeated, which project should the company proceed with?
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