Expected to be repeated into foreseeable future

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Reference no: EM132057630

Expected Net Cash Flows

Year Project T Project F

0 ($100,000) ($100,000)

1 75,000 40,000

2 65,000 42,000

3 — 44,000

4 — 46,000

The projects provide a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have a 12% cost of capital.

c. Suppose you replicate Project T so that it has the same life as Project F. Which project would you choose?

NPV Project F = $29,748.59

EAA Project F = $9,794.26

Reference no: EM132057630

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