Type your question Dobbs Company is considering two different, mutually exclusiv
ID: 2371017 • Letter: T
Question
Type your question Dobbs Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $381,100, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flows by $72,100. Project B will cost $268,800, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flows by $52,700. A discount rate of 6% is appropriate for both projects.
Compute the net present value of each project.here
Explanation / Answer
the net present value of the projects A = 72100 PVIFA(6%,10) - 381100 = $149,562.28
the net present value of the projects B = 52700 PVIFA(6%,10) - 268800 = $119,076.59
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