Assuming that the capital is available for either investment

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Reference no: EM131391993

Your company has two investment opportunities under consideration with the cash flows shown below. The company’s before-tax MARR is 12%.

Investment A

Initial Cost $40,000

Annual R-E $14,000 (years 1-6)

Salvage Value $5,000 (eoy 6)

6 years

Investment B

Initial Cost $80,000

Annual R-E $27000 (years 1-5)

Salvage Value $6,500 (eoy 5)

Life 5 years

Assuming that the capital is available for either investment and they are mutually exclusive, determine which one should be selected. Use the co-terminated assumption with a 6 year study period. Hint: Find the FW at the end of 6 years without repeating the cash flows.

Reference no: EM131391993

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