Computation of selection of the project
Jekyll & Hyde Corp. is evaluating two mutually exclusive projects. Their cost of capital is 15 percent. Costs and cash flows are given in the following table. Which project should be accepted?
Year
|
Cash flow
|
Project 1
|
Project 2
|
0
|
$ (1,250,000)
|
$ (1,250,000)
|
1
|
$ 250,000
|
$ 350,000
|
2
|
$ 350,000
|
$ 350,000
|
3
|
$ 450,000
|
$ 350,000
|
4
|
$ 500,000
|
$ 350,000
|
5
|
$ 750,000
|
$ 350,000
|