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Category > Business & Finance Posted 31 May 2017 My Price 8.00

Mutually Exclusive Projects with Unequal Lives

Mutually Exclusive Projects with Unequal Lives. Murray’s Coffee House is trying to choose between two new coffee bean roasters. The required rate of return for either machine is 10%. Shown below are the after-tax cash flows associated with each machine:

 

year CFX CFY

 

0 (50,000) (30,000)

1 20,000 20,000

2 20,000 20,000

3 20,000

4 20,000

 

a. Calculate the replacement chain NPV for each project.

b. Calculate the equivalent annual annuity for each project.

c. Which project should be selected? Why?

 

Answers: a. RCNPVX = $13,397, RCNPVY = $8,604; b. EAAX = $4,226, EAAY = $2,714

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Status NEW Posted 31 May 2017 04:05 AM My Price 8.00

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