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Three mutually exclusive investment alternatives are under consideration. The initial capital outlays and the pattern of the net annual cash benefits (revenues -  expenses) for each alternatives are presented in the following table. Based on NPV analysis, if the company’s minimum acceptable rate of return is 10%, which alternative should be the best economic choice? Use appropriate IRR analysis to double-check your selection.   Investment, M$   A B C Initial cost  -$200  -$350  -$500 Net Revenues, year 1 to 3   $80   $105   $85 Net Revenues, year 4   $60   $90   $150 Net Revenues, year 5   $40   $80   $250

Three mutually exclusive investment alternatives are under consideration. The initial capital outlays and the pattern of the net annual cash benefits (revenues -  expenses) for each alternatives are presented in the following table. Based on NPV analysis, if the company’s minimum acceptable rate of return is 10%, which alternative should be the best economic choice? Use appropriate IRR analysis to double-check your selection.   Investment, M$   A B C Initial cost  -$200  -$350  -$500 Net Revenues, year 1 to 3   $80   $105   $85 Net Revenues, year 4   $60   $90   $150 Net Revenues, year 5   $40   $80   $250

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 7P
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Q.1. Three mutually exclusive investment alternatives are under consideration. The initial capital outlays and the pattern of the net annual cash benefits (revenues -  expenses) for each alternatives are presented in the following table. Based on NPV analysis, if the company’s minimum acceptable rate of return is 10%, which alternative should be the best economic choice? Use appropriate IRR analysis to double-check your selection.

 

Investment, M$

 

A

B

C

Initial cost

 -$200

 -$350

 -$500

Net Revenues, year 1 to 3

  $80

  $105

  $85

Net Revenues, year 4

  $60

  $90

  $150

Net Revenues, year 5

  $40

  $80

  $250
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