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    Investment Alternatives for Decisions

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    Mr. Kulonda, VP of Operations at McClain Manufacturing, has
    to make a decision between two investment alternatives.
    Investment A has an initial cost of $61,000, and investment B
    has an initial cost of $74,000. The useful life of investment A is
    6 years; the useful life of investment B is 7 years. Given a cost
    of capital of 9% and the following cash flows for each
    alternative, determine the most desirable investment alternative
    according to the net present value criterion.

    Investment A's
    Cash Flow
    Investment B's
    cash Flow
    Year
    $19,000 $19,000 1
    19,000 20,000 2
    19,000 21,000 3
    19,000 22,000 4
    19,000 21,000 5
    19,000 20,000 6
    19,000 11,000 7

    Please refer to the file attached and show the detailed calculations. Many thanks!

    © BrainMass Inc. brainmass.com October 10, 2019, 3:56 am ad1c9bdddf
    https://brainmass.com/business/discounted-cash-flows-model/investment-alternatives-decisions-442380

    Solution Preview

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    QUESTION

    Mr. Kulonda, VP of Operations at McClain Manufacturing, has to make a decision between two investment alternatives. Investment A has an initial cost of $61,000, and investment B
    has an initial cost of $74,000. The useful life of investment A is 6 years; the useful life of investment B is 7 years. Given a cost of capital of 9% ...

    Solution Summary

    The expert examines investment alternatives for decisions.

    $2.19