Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
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Accounting provide a. And. b

You are given the following information about
two projects planned by your company. Two
projects are of the same initial costs with an
installment payment of $0.3 million per year at
the beginning of each year.
Project Year 1 Year 2 Year 3 Year 4 Year 5
650 1520-650 -150
A
B
580 -475 1200
1650
-679 2250
a) What is "Capital Budgeting"? What are the
basic assumptions for this analysis?
b) Suppose the cost of capital is 10%. What are
the Net Present Values for these two projects?
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Transcribed Image Text:You are given the following information about two projects planned by your company. Two projects are of the same initial costs with an installment payment of $0.3 million per year at the beginning of each year. Project Year 1 Year 2 Year 3 Year 4 Year 5 650 1520-650 -150 A B 580 -475 1200 1650 -679 2250 a) What is "Capital Budgeting"? What are the basic assumptions for this analysis? b) Suppose the cost of capital is 10%. What are the Net Present Values for these two projects?
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