Quorex is evaluating two mutually exclusive projects. Project A has a net investment of $50,000 and net cash flows over a six-year period of $13,000 per year (NOTE: that project requires a reinvestment with the same cost and cash flow for another six years). Project B has a net investment of $48,500, but its net cash flows of $8,740 per year will occur over a 12-year period. If Quorex has a cost of capital of 14% for these projects, which project, if either, should be chosen, and what is its NPV?

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
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Quorex is evaluating two mutually exclusive projects. Project A has a net investment of $50,000 and net cash flows over a six-year period of $13,000 per year (NOTE: that project requires a reinvestment with the same cost and cash flow for another six years). Project B has a net investment of $48,500, but its net cash flows of $8,740 per year will occur over a 12-year period. If Quorex has a cost of capital of 14% for these projects, which project, if either, should be chosen, and what is its NPV? 

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