BSalvageValueSalvageValueCash FlowCash Flow-$12,000-$10,0001-$2,000$6,000-$2,100$6,0002-$2,000$4,000-$2,100$3,0003-$2,000$3,000-$2,100$1,0004-$2,000$2,0005-$2,000$2,000Consider the following two mutually exclusive investmentprojects:Salvage values represent the net proceeds (after tax) from thedisposal of assets if they are sold at the end of the year listed.Both projects will be available (and can be repeated) with thesame costs and salvage values for an indefinite period.(a) With an infinite planning horizon which project is a betterchoice at MARR= 12%?(b) With a 10-year planning horizon, which project is a betterchoice at MARR = 12%?

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Answered: A S. n Cash Flow -$12,000 1 -$2,000 $»…

Business

Accounting

A S. n Cash Flow -$12,000 1 -$2,000 $» 2 -$2,000 $- 3 -$2.000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

B
Salvage
Value
Salvage
Value
Cash Flow
Cash Flow
-$12,000
-$10,000
1
-$2,000
$6,000
-$2,100
$6,000
2
-$2,000
$4,000
-$2,100
$3,000
3
-$2,000
$3,000
-$2,100
$1,000
4
-$2,000
$2,000
5
-$2,000
$2,000
Consider the following two mutually exclusive investment
projects:
Salvage values represent the net proceeds (after tax) from the
disposal of assets if they are sold at the end of the year listed.
Both projects will be available (and can be repeated) with the
same costs and salvage values for an indefinite period.
(a) With an infinite planning horizon which project is a better
choice at MARR= 12%?
(b) With a 10-year planning horizon, which project is a better
choice at MARR = 12%?

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