Compare the following projects using the NPV method and the EAA method if the cost of capital is 17%. Year Project A Project B 0 ($400,000) ($400,000) 1 $175,000 $160,000 2 $225,000 $160,000 3 $300,000 $160,000 4 $200,000 $160,000 5 $160,000 6 $155,000 7 $155,000 8 $155,000 Use the information given in problem 8 to replicate Project A and compute the NPV of the new project that lasts for 8 years.
Compare the following projects using the NPV method and the EAA method if the cost of capital is 17%. Year Project A Project B 0 ($400,000) ($400,000) 1 $175,000 $160,000 2 $225,000 $160,000 3 $300,000 $160,000 4 $200,000 $160,000 5 $160,000 6 $155,000 7 $155,000 8 $155,000 Use the information given in problem 8 to replicate Project A and compute the NPV of the new project that lasts for 8 years.
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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Question
- Compare the following projects using the
NPV method and the EAA method if the cost of capital is 17%.
|
Year |
Project A |
Project B |
|
0 |
($400,000) |
($400,000) |
|
1 |
$175,000 |
$160,000 |
|
2 |
$225,000 |
$160,000 |
|
3 |
$300,000 |
$160,000 |
|
4 |
$200,000 |
$160,000 |
|
5 |
$160,000 |
|
|
6 |
$155,000 |
|
|
7 |
$155,000 |
|
|
8 |
$155,000 |
- Use the information given in problem 8 to replicate Project A and compute the NPV of the new project that lasts for 8 years.
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