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Cash flows are after tax and depreciation

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These two companies are investigating similar projects (but not both projects) in which they will invest. The characteristics of the two systems are given below:

Project 1                    Project 2

Initial Outlay (IO)                   $700,000                    $2,000,000

Annual Cash Flows (CF)         $350,000                    $900,000

Life of system                         7 years                        4 years

All cash flows are after tax and depreciation.

A flat rate of 12% is estimated as the risk in both of these projects.

Decide whether to invest into the company looking to invest in the project

Reference no: EM132149230

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