The Kitchen Inc. is considering the following 3 mutually exclusive projects. Pro

Question

The Kitchen Inc. is considering the following 3 mutually exclusive projects. Projected cash flows for these ventures are as follows:

Plan A Plan B Plan C
Initial Initial Initial
Outlay=$3,600,000 Outlay=$6,000,000 Outlay=$3,500,000
Cash Flow: Cash Flow: Cash Flow:
Yr 1=$ -0- Yr 1=$4,000,000 Yr 1=$2,000,000
Yr 2= -0- Yr 2= 3,000,000 Yr 2= -0-
Yr 3= -0- Yr 3= 2,000,000 Yr 3=2,000,000
Yr 4= -0- Yr 4= -0- Yr 4=2,000,000
Yr 5=$7,000,000 Yr 5= -0- Yr 5=2,000,000

If the Kitchen has a 12% cost of capital, what decision should be made regarding the projects above? Answer                                                   
           Accept plan A                             
           Accept plan B                             
           Accept plan C                             
           Accept Plans A, B and C The Kitchen Inc. is considering the following 3 mutually exclusive projects. Projected cash flows for these ventures are as follows:

Plan A Plan B Plan C
Initial Initial Initial
Outlay=$3,600,000 Outlay=$6,000,000 Outlay=$3,500,000
Cash Flow: Cash Flow: Cash Flow:
Yr 1=$ -0- Yr 1=$4,000,000 Yr 1=$2,000,000
Yr 2= -0- Yr 2= 3,000,000 Yr 2= -0-
Yr 3= -0- Yr 3= 2,000,000 Yr 3=2,000,000
Yr 4= -0- Yr 4= -0- Yr 4=2,000,000
Yr 5=$7,000,000 Yr 5= -0- Yr 5=2,000,000

If the Kitchen has a 12% cost of capital, what decision should be made regarding the projects above? The Kitchen Inc. is considering the following 3 mutually exclusive projects. Projected cash flows for these ventures are as follows:

Plan A Plan B Plan C
Initial Initial Initial
Outlay=$3,600,000 Outlay=$6,000,000 Outlay=$3,500,000
Cash Flow: Cash Flow: Cash Flow:
Yr 1=$ -0- Yr 1=$4,000,000 Yr 1=$2,000,000
Yr 2= -0- Yr 2= 3,000,000 Yr 2= -0-
Yr 3= -0- Yr 3= 2,000,000 Yr 3=2,000,000
Yr 4= -0- Yr 4= -0- Yr 4=2,000,000
Yr 5=$7,000,000 Yr 5= -0- Yr 5=2,000,000

If the Kitchen has a 12% cost of capital, what decision should be made regarding the projects above? Accept plan A Accept plan B Accept plan C Accept Plans A, B and C                             
           Accept plan A                             
           Accept plan B                             
           Accept plan C                             
           Accept Plans A, B and C

Explanation / Answer

future value of cost for A=6344430 which is less than 7000000

so it is feasible

similar following B is not feasible

similarly C is also feasible

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