Assignment
You work for the 3T company, which expects to earn at least 18 percent on its investments. You have to choose between two similar projects. Below is the cash information for each project. Your analyst predicts that inflation rate will be a stable 3 percent over the next 7 years. Which of the two projects would you fund if the decision is based only on financial information? Why?
|
Omega Year
|
Inflow
|
Outflow
|
Netflow
|
Apha Year
|
Inflow
|
Outflow
|
Netflow
|
|
Y0
|
0
|
$225,000
|
-225,000
|
Y0
|
0
|
$300,000
|
-300,000
|
|
Y1
|
0
|
190,000
|
-190,000
|
Y1
|
$50,000
|
100,000
|
-50,000
|
|
Y2
|
$150,000
|
0
|
150,000
|
Y2
|
150,000
|
0
|
150,000
|
|
Y3
|
220,000
|
30,000
|
190,000
|
Y3
|
250,000
|
50,000
|
200,000
|
|
Y4
|
215,000
|
0
|
215,000
|
Y4
|
250,000
|
0
|
250,000
|
|
Y5
|
205,000
|
30,000
|
175,000
|
Y5
|
200,000
|
50,000
|
150,000
|
|
Y6
|
197,000
|
0
|
197,000
|
Y6
|
180,000
|
0
|
180,000
|
|
Y7
|
100,000
|
30,000
|
70,000
|
Y7
|
120,000
|
30,000
|
90,000
|
|
TOTAL
|
1,087,000
|
505,000
|
582,000
|
TOTAL
|
1,200,00
|
530,000
|
670,000
|