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  3. a) a company is considering two mutually exclusive

a) A company is considering two mutually exclusive expansion plans. Plan A requires a $30...

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Finance

a) A company is considering two mutually exclusive expansion plans. Plan A requires a $30 million expenditure on a large-scale, integrated plant that would provide expected cash flows of $8.9 million per year for 5 years. Plan B requires a $4 million expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow of $1.3 million per year for 5 years. The firm's WACC is 12 percent. Calculate each project's NPV

Group of answer choices

NPVA = $2.08 million NPVB = $0.47 million

NPVA = $3.07 million NPVB = $0.47 million

NPVA = $2.08 million NPVB = $0.69 million

NPVA = $3.07 million NPVB = $0.69 million

b)Project S costs $12,000, and its expected cash flows would be $4,050 per year for 5 years. Mutually exclusive Project L costs $40,000, and its expected cash flows would be $12,500 per year for 5 years. If both projects have a WACC of 14 percent, which project would you recommend?

Group of answer choices

Project L

Project S

Both

Neither

Answer & Explanation Solved by verified expert
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