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Consider two mutually exclusive R&D projects that Savage Tech is considering. Assume the discount rate...

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Finance

Consider two mutually exclusive R&D projects that Savage Tech is considering. Assume the discount rate for both projects is 8 percent. Project A: Server CPU .13 micron processing project By shrinking the die size to .13 micron, the company will be able to offer server CPU chips with lower power consumption and heat generation, meaning faster CPUs. Project B: New telecom chip project Entry into this industry will require introduction of a new chip for cell phones. The know-how will require a large amount of up-front capital, but success of the project will lead to large cash flows later on. Year Project A Project B 0 $ 705,000 $ 910,000 1 340,000 255,000 2 355,000 360,000 3 255,000 360,000 4 180,000 410,000 5 120,000 495,000

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