NPV unequal lives. Singing Fish Fine Foods has $2,100,000 for capital investments this year and...
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Finance
NPV unequal
lives.
Singing Fish Fine Foods has
$2,100,000
for capital investments this year and is considering two potential projects for the funds. Project 1 is updating the store's deli section for additional food service. The estimated after-tax cash flow of this project is
$630,000
per year for the next five years. Project 2 is updating the store's wine section. The estimated annual after-tax cash flow for this project is
$530,000
for the next six years. If the appropriate discount rate for the deli expansion is
9.6%
and the appropriate discount rate for the wine section is
8.9%,
use the NPV to determine which project Singing Fish should choose for the store. Adjust the NPV for unequal lives with the equivalent annual annuity. Does the decision change?
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