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Question
Interstate Appliance Inc. is considering the following 3 mutually exclusive projects. Projected cash flows for these ventures are as follows:| Plan A | Plan B | Plan C |
| Initial | Initial | Initial |
| Outlay = $3,600,000 | Outlay = $6,000,000 | Outlay = $3,500,000 |
| Cash Flow: | Cash Flow: | Cash Flow: |
| Yr 1 = $-0- | Yr 1 = $4,000,000 | Yr 1 = $2,000,000 |
| Yr 2= -0- | Yr 2 = 3,000,000 | Yr 2 = -0- |
| Yr 3 = -0- | Yr 3 = 2,000,000 | Yr 3 = 2,000,000 |
| Yr 4 = -0- | Yr 4 = -0- | Yr 4 = 2,000,000 |
| Yr 5 = $7,000,000 | Yr 5 = -0- | Yr 5 = 2,000,000 |
If Interstate Appliance has a 12% cost of capital, what decision should be made regarding the projects above?
A) accept plan A
B) accept plan B
C) accept plan C
D) accept Plans A, B and C
Answer
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