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bachelor in business administration
Polytechnic State University Sanluis
Jan-2006 - Nov-2010
CPA
Polytechnic State University
Jan-2012 - Nov-2016
Professor
Harvard Square Academy (HS2)
Mar-2012 - Present
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:
Â
year CFXÂ CFY
Â
0 (50,000) (30,000)
1 20,000 20,000
2 20,000 20,000
3 20,000
4 20,000
Â
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?
Yea-----------r C-----------ash-----------flo-----------w (-----------X) -----------Cas-----------hfl-----------ow -----------(Y)----------- 0 ------------$5-----------0,0-----------00 ------------$3-----------0,0-----------00 -----------1 $-----------20,-----------000----------- $2-----------0,0-----------00 -----------2 $-----------20,-----------000----------- $2-----------0,0-----------00 -----------3 $-----------20,-----------000----------- $2-----------0,0-----------00 -----------4 $-----------20,-----------000----------- $2-----------0,0-----------00 -----------Cos-----------t o-----------f c-----------api-----------tal----------- 10-----------.00-----------% 1-----------0.0-----------0%