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samualson samualson
wrote...
Posts: 2459
5 years ago
Your firm is considering investing in one of two mutually exclusive projects. Project A requires an initial outlay of $3,500 with expected future cash flows of $2,000 per year for the next three years. Project B requires an initial outlay of $2,500 with expected future cash flows of $1,500 per year for the next two years. The appropriate discount rate for your firm is 12% and it is not subject to capital rationing. Assuming both projects can be replaced with a similar investment at the end of their respective lives, compute the NPV of the two chain cycle for Project A and three chain cycle for Project B.
A) $2,232 and $85
B) $5,000 and $1,500
C) $2,865 and $94
D) $3,528 and $136
Textbook 
Foundations of Finance

Foundations of Finance


Edition: 9th
Authors:
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Replies
wrote...
5 years ago
 A
 
samualson Author
wrote...
5 years ago
Good timing, thanks!
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