What is the equivalent annual annuity for the thai project

Assignment Help Financial Management

Reference no: EM131563015

Your company is considering starting a project in either Italy or Thailand - and are mutually exclusive.

Italian project is a 6 year project with the following expected cash flows:

Year 0 = -$975,000

Year 1 = 350,000

Year 2 = 370,000

Year 3 = 390,000

Year 4 = 320,000

Year 5 = 115,000

Year 6 = 80,000

The Thai project is a 3 year project; however the company plans to repeat the project after 3 years. The expected cash flows are:

Year 0 = -$490,000

Year 1 = 250,000

Year 2 = 265,000

Year 3 = 275,000

Due to the project unequal lives, use the annual annuity approach to evaulate them, the approprite cost of capital for both project is 9%. What is the NPV of both projects?

What is the equivalent annual annuity (EAA) for the Thai project?

What is the EAA for the Italian project?

If the CFO uses the EAA approach to decide which project to undertake, he should choose the Thai/Italian project because it has the highest/lowest EAA.

Reference no: EM131563015

Questions Cloud

Calculate the cross-sectional area a : When mineral deposits form a uniform coating 1 mm thick on the inside of a pipe of radius r (in mm), the cross-sectional area A through which water can flow.

How much is the stock currently worth : If the discount rate is 12 percent, how much is the stock currently worth?

Find the laplace transform of the following piecewise : Find the Laplace transform of the following piecewise function

What are the elements of a well written audit report : What are the components/elements of a well written audit report finding? Discuss any two of them

What is the equivalent annual annuity for the thai project : What is the equivalent annual annuity (EAA) for the Thai project? What is the EAA for the Italian project?

How long should the fuse last : The height h (in m) of a fireworks shell shot vertically upward as a function of time t (in s) is h = -4.9t2 + 68t + 2.

Would have preferred to receive dividend payment : Suppose the board decided to do a? one-time share? repurchase, but? you, as an? investor, would have preferred to receive a dividend payment.

The variance of the return on equally weighted portfolio : What are the expected return and the variance of the return on an equally weighted portfolio of all N securities?

Describe how this flower population could give rise to two : Describe how this flower population could give rise to two new species. Make sure to tell me what type of speciation this represents (specifically), and what changes you would expect to see in the resulting flower species.

User Account

All Pages