Time Cash Flow X Cash Flow Y (S80,000) (S75,000) 40,000 35,000 60,000 35,000 3 70,000 35,000 35,000 5,000

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
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A firm has two mutually exclusive investment projects to
evaluate. The projects have the following cash flows:

Projects X and Y are equally risky and may be repeated indefinitely. If the firm’s WACC is
10%, what is the EAA of the project that adds the most value to the firm? (Round your final
answer to the nearest whole dollar.)

Time
Cash Flow X
Cash Flow Y
(S80,000)
(S75,000)
40,000
35,000
60,000
35,000
3
70,000
35,000
35,000
5,000
Transcribed Image Text:Time Cash Flow X Cash Flow Y (S80,000) (S75,000) 40,000 35,000 60,000 35,000 3 70,000 35,000 35,000 5,000
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