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The cash flows for two projects, A and B, are shown in the table, below. Notice that Project A has a ...

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The cash flows for two projects, A and B, are shown in the table, below. Notice that Project A has a ...

The cash flows for two projects, A and B, are shown in the table, below. Notice that Project A has a life of 3 years and Project B has a 2 year life. Use the replacement chain approach to calculate the NPV of each project over a common life-span. What is the NPV of the Project A chain minus the NPV of the Project B chain? Assume that the cost of capital is 8%.

	Project CFs	Project CFs
Time	A	B
0	-150	-104
1	66	66
2	66	66
3	66	0
NPV	$20.09	$13.70

▸ $0.45

▸ $0.47

▸ $0.49

▸ $0.50

▸ $0.52

Textbook

Corporate Finance Online

Edition: 2^nd

Authors: Eakins, McNally

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