Question 1
A company is considering a project that will require a cost outlay of $17 200 per year for 3 years. At the end of the project the salvage value will be $15 000. The project will yield returns of $60 000 in Year 4 and $20 000 in Year 5. There are no returns after Year 5. Alternative investments are available that will yield a return of 14.2%. Should the company undertake the project?
Question 2
A company is considering a project that will require a cost outlay of $25 000 per year for 3 years. At the end of the project the salvage value will be $15 000. The project will yield annual net returns of $17 500 for 5 years. Alternative investments are available that will yield a return of 15%. Should the company undertake the project?