P12-14 Unequal lives: ANPV approach Portland Products is considering the purchase of one of three mutually exclusive projects for increasing…

P12–14 Unequal lives: ANPV approach Portland Products is considering the purchase of

one of three mutually exclusive projects for increasing production efficiency. The

firm plans to use a 14% cost of capital to evaluate these equal-risk projects. The initial

investment and annual cash inflows over the life of each project are shown in the

following table.

                                                       Project X                  Project Y                  Project ZInitial investment (CF0)               -$78,000                 -$52,000                   -$66,000        Year (t)                                                 Cash inflows (CFt)           1                                           $17,000                  $28,000                     $15,000           2                                            25,000                    38,000                        15,000           3                                            33,000                                                        15,000           4                                            41,000                                                        15,000           5                                                                                                                15,000           6                                                                                                                15,000           7                                                                                                                15,000           8                                                                                                                15,000

a. Calculate the NPV for each project over its life. Rank the projects in descendingorder on the basis of NPV.b. Use the annualized net present value (ANPV) approach to evaluate and rank theprojects in descending order on the basis of ANPV.c. Compare and contrast your findings in parts a and b. Which project would yourecommend that the firm purchase? Why?

*Please put in an excel file*

Thank you 

Answer:a Year X012345678 Y-7800017000250003300041000 Z-520002800038000 PVF-660001500015000150001500015000150001500015000 PV XPV YPV Z1-78000 -52000-660000.87719…

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