Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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NPV unequal
lives.
Singing Fish Fine Foods has
​$1,800,000
for capital investments this year and is considering two potential projects for the funds. Project 1 is updating the​ store's deli section for additional food service. The estimated​after-tax cash flow of this project is
​$620,000
per year for the next five years. Project 2 is updating the​ store's wine section. The estimated annual​ after-tax cash flow for this project is
​$540,000
for the next six years. If the appropriate discount rate for the deli expansion is
9.5​%
and the appropriate discount rate for the wine section is
9.1​%,
use the NPV to determine which project Singing Fish should choose for the store. Adjust the NPV for unequal lives with the equivalent annual annuity. Does the decision​ change?
If the appropriate discount rate for the deli expansion is
9.5​%,
what is the NPV of the deli​ expansion?
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