A firm utilizes a strategy of capital rationing, which is currently $375,000 and
ID: 2358248 • Letter: A
Question
A firm utilizes a strategy of capital rationing, which is currently $375,000 and is considering the following 2 projects: Project A has a cost of $335,000 and the following cash flows: year 1 $140,000; year 2 $150,000; and year 3 $100,000. Project B has a cost of $365,000 and the following cash flows: year 1 $220,000; year 2 $110,000; and year 3 $150,000. Using a 12% cost of capital, which decision should the financial manager make?
A firm utilizes a strategy of capital rationing, which is currently $375,000 and is considering the following 2 projects: Project A has a cost of $335,000 and the following cash flows: year 1 $140,000; year 2 $150,000; and year 3 $100,000. Project B has a cost of $365,000 and the following cash flows: year 1 $220,000; year 2 $110,000; and year 3 $150,000. Using a 12% cost of capital, which decision should the financial manager make?
Explanation / Answer
Select both projects
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