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Mutually Exclusive Projects with Unequal Lives.

Murray's Coffee House is trying to choose between two new coffee bean roasters. The required rate of return for either machine is 10%. Shown below are the after-tax cash flows associated with each machine:

year       CFX              CFY
0        (50,000)       (30,000)
1        20,000          20,000
2        20,000          20,000
3        20,000
4        20,000

a. Calculate the replacement chain NPV for each project.

b. Calculate the equivalent annual annuity for each project.

c. Which project should be selected? Why?

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Category:- Basic Finance
Reference No.:- M91599340

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