Arrow Electronics is considering Projects S and L, which are mutually exclusive, equally risky, and not repeatable. Project S has an initial cost of $1 million and cash inflows of $370.000 for 4 years, while Project L has an initial cost of $2 million and cash inflows of $720, 000 for 4 years. The CEO wants to use the IRR criterion. while the CFO favors the NPV method, using a WACC of 6.67%.

Arrow Electronics is considering Projects S and L, which are mutually exclusive, equally risky, and not repeatable. Project S has an initial cost of $1 million and cash inflows of $370.000 for 4 years, while Project L has an initial cost of $2 million and cash inflows of $720, 000 for 4 years. The CEO wants to use the IRR criterion. while the CFO favors the NPV method, using a WACC of 6.67%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 5P

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