ABC Inc. is considering two mutually exclusive investment projects, each of which requires an up-front expenditure of $2,408,000.00. You estima that the investments will produce the following net cash flows: Project A $4,870,000 $19,900,000 Year Project B 1 10,200,000 10,960,000 3 20,920,000 5,590,000 Which project should ABC Inc. choose , assuming the cost of capital is 11.25%? O Choose Project B becasue NPV > NPV, by $2.990,410.07. O Choose Project A becasue NPVA > NPV8 by $2.810,985.47, O Choose Project A becasue NPVA> NPV8 by $3,169.834.68. O Choose Project B becasue NPVB > NPVA by $3,229,642.88. O Choose Project A becasue NPVA > NPV8 by $2,661,464,97.
ABC Inc. is considering two mutually exclusive investment projects, each of which requires an up-front expenditure of $2,408,000.00. You estima that the investments will produce the following net cash flows: Project A $4,870,000 $19,900,000 Year Project B 1 10,200,000 10,960,000 3 20,920,000 5,590,000 Which project should ABC Inc. choose , assuming the cost of capital is 11.25%? O Choose Project B becasue NPV > NPV, by $2.990,410.07. O Choose Project A becasue NPVA > NPV8 by $2.810,985.47, O Choose Project A becasue NPVA> NPV8 by $3,169.834.68. O Choose Project B becasue NPVB > NPVA by $3,229,642.88. O Choose Project A becasue NPVA > NPV8 by $2,661,464,97.
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Question 8
ABC Inc. is considering two mutually exclusive investment projects, each
of which requires an up-front expenditure of $2,408,000.00. You estimate
that the investments will produce the following net cash flows:
Year
Project A
$4,870,000 $19,900,000
Project B
1
2
10,200,000
10,960,000
20,920,000
5,590,000
Which project should ABC Inc. choose , assuming the cost of capital is
11.25%?
O Choose Project B becasue NPV8 > NPV, by $2,990,410.07.
O Choose Project A becasue NPVA> NPV8 by $2,810,985.47,
O Choose Project A becasue NPVA> NPVB by $3,169,834.68.
O Choose Project B becasue NPVB > NPVA by $3,229,642.88.
O Choose Project A becasue NPVA > NPV8 by $2,661,464.97.
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