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Axis Corp. is considering an investment in the best of two mutually exclusive projects. Project Kelvin...

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Finance

Axis Corp. is considering an investment in the best of twomutually exclusive projects. Project Kelvin involves an overhaul ofthe existing? system; it will cost ?$5 and generate cash inflows of?$10 per year for the next 33 years. Project Thompson involvesreplacement of the existing? system; it will cost ?$265 andgenerate cash inflows of ?$61 per year for 66 years. Using? a(n)11.89 cost of? capital, calculate each? project's NPV, and make arecommendation based on your findings.

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4.3 Ratings (526 Votes)
Net Present Value NPV Project Kelvin Year Annual Cash Flow Present Value factor at 1189 Present Value of Cash Flow 1 10000 0893735 893735 2 10000 0798762 798762 3 10000 0713882 713882 TOTAL 2406379 Net    See Answer
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Transcribed Image Text

Axis Corp. is considering an investment in the best of twomutually exclusive projects. Project Kelvin involves an overhaul ofthe existing? system; it will cost ?$5 and generate cash inflows of?$10 per year for the next 33 years. Project Thompson involvesreplacement of the existing? system; it will cost ?$265 andgenerate cash inflows of ?$61 per year for 66 years. Using? a(n)11.89 cost of? capital, calculate each? project's NPV, and make arecommendation based on your findings.

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