Author Question: Pinkerton Truck Rental is considering two mutually exclusive engine development projects. The RPX ... (Read 35 times)

campbellfam07 · **on:** Aug 7, 2023

Pinkerton Truck Rental is considering two mutually exclusive engine development projects. The RPX design has an expected life of 4 years and projected cash inflows are $4.8 million at the end of each of the first 2 years and $2.4 million in each of the next 2 years. The RPB design is more flexible and has an 8-year life. The projected end-of-year flows from the RPB design are $3.2 million in each of the first 2 years and $2.8 million in each of the next 6 years. Both projects require an initial investment of $6.9 million, and Pinkerton’s cost of capital is 13%. What is the NPV (on an 8-year extended basis) of the project with the most value to the company?

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$6.844 million

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$7.204 million

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$7.985 million

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$8.311 million

Rcfelber · **Reply #1 on:** Aug 7, 2023

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