Net Cash Flows (S) 701234 Year 0 Project T Project F -100,000 -100,000 60,000 33,500 2 60,000 33,500 33,500 33,500 Project T has a life of two years and project F has a life of four years. The cost of capital is 10% for both projects. Assume that both projects will be needed in future, and they can be repeated forever without any changes in their cash flows. Use the above information to answer questions 17-19. 17. Over a common life of 4 years, what is the NPV of project T [ (NPV (T, 2)]? a. $8264.46 b. $6190.49 c. $4132.23 d. $7547.30 e. $7428.96 18. What is the Equivalent Annual Annuity (EAA) of project F? a. $2103.98 b. $1898.12 c. $1952.92 d. $2088.12 e. $1924.76 19. Which project should be accepted? a. Project T b. Project F c. None of the projects

Net Cash Flows (S) 701234 Year 0 Project T Project F -100,000 -100,000 60,000 33,500 2 60,000 33,500 33,500 33,500 Project T has a life of two years and project F has a life of four years. The cost of capital is 10% for both projects. Assume that both projects will be needed in future, and they can be repeated forever without any changes in their cash flows. Use the above information to answer questions 17-19. 17. Over a common life of 4 years, what is the NPV of project T [ (NPV (T, 2)]? a. $8264.46 b. $6190.49 c. $4132.23 d. $7547.30 e. $7428.96 18. What is the Equivalent Annual Annuity (EAA) of project F? a. $2103.98 b. $1898.12 c. $1952.92 d. $2088.12 e. $1924.76 19. Which project should be accepted? a. Project T b. Project F c. None of the projects

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 21P

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