Suppose a company must choose between two projects (A and B) with the following characteristics:...
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Suppose a company must choose between two projects (A and B) with the following characteristics: Project A Project B Cost of equipment (investment) $770,000 Working capital (investment) $710,000 Cash flow (year 2) $200,000 $250,000 Cash flow (year 3) $270,000 $250,000 Cash flow (year 4) $270,000 $250,000 Cash flow (year 5) $300,000 $250,000 Assume an effective rate of 6% per year. Calculate the NPV for each alternative. Which project should the company choose and why?
(30 pts) Suppose a company must choose between two projects (A characteristics: Project A Project B Cost of equipment (investment) $770,000 0 Working capital investment) 0 $710,000 Cash flow (year 2) $200,000 $250,000 Cash flow (year 3) $270,000 $250,000 Cash flow (year 4) $270,000 $250,000 Cash flow (year 5) $300,000 $250,000 Assume an effective rate of 6% per year. Calculate the NPV for eac should the company choose and why
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