Consider the following fourmutually exclusive projects: Project J, K, L, and M. Assume that the investment in each project gets perpetually renewed (all the projects are perpetual). The cost of capital is 16%. Rank the projects according to profitability J K L M Initial investment 49,000 75,000 65,000 35,000 Annual cash flow 21,000 8,000 16,000 13,000 Lifecycle (years) 6 26 14 5s You are going to want to find the NPV and EAC of the cash flows. Since all of the cash flows are the same, you can use the PV function. Pay attention to the sign of the cash flows! You can also use the RANK function to rank the EACs for the four projects.
Consider the following fourmutually exclusive projects: Project J, K, L, and M. Assume that the investment in each project gets perpetually renewed (all the projects are perpetual). The cost of capital is 16%. Rank the projects according to profitability J K L M Initial investment 49,000 75,000 65,000 35,000 Annual cash flow 21,000 8,000 16,000 13,000 Lifecycle (years) 6 26 14 5s You are going to want to find the NPV and EAC of the cash flows. Since all of the cash flows are the same, you can use the PV function. Pay attention to the sign of the cash flows! You can also use the RANK function to rank the EACs for the four projects.
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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Consider the following fourmutually exclusive projects: Project J, K, L, and M. Assume that the investment in each project gets perpetually renewed (all the projects are perpetual). The cost of capital is 16%. Rank the projects according to profitability
| J | K | L | M | |
| Initial investment | 49,000 | 75,000 | 65,000 | 35,000 |
| Annual cash flow | 21,000 | 8,000 | 16,000 | 13,000 |
| Lifecycle (years) | 6 | 26 | 14 | 5s |
You are going to want to find the
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