The final two mutually exclusive projects that Caledonia is considering involve mutually exclusive pieces of machinery that perform the same task. The two alternatives available provide the following set of after-tax net cash flows:
Equipment A has an expected life of three years, whereas equipment B has an expected life of nine years. Assume a required rate of return of 14 percent.
a. Calculate each project's payback period.
b. Calculate each project's net present value.
c. Calculate each project's internal rate of return.
d. Are these projects comparable? DEANA
e. Compare these projects using replacement chains and EEAs. Which project should be selected? Support your recommendation.
This solution provides step by step calculations for project's payback period, net present value, and internal rate of return.