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NEW QUESTION: 1
Foundation Systems, a software engineering company, is considering the acceptance of two mutually exclusive projects. Assume the following information:
Project A
Initial cash outlay ($40,000)
t1: $8,000
t2: $14,000
t3: $13,000
t4: $12,000
t5: $11,000
t6: $10,000
cost of capital is 11.5%
Project B
Initial cash outlay ($20,000)
t1: $7,000
t2: $13,000
t3 $12,000
cost of capital is 11.5%
Assuming no taxes, a $0.00 salvage value at the end of each project, and the fact that both projects can be replicated identically at the end of their lives, which is the superior project according to the Common Life approach? Additionally, what is the NPV of the superior project over the common life?
A. Project B, NPV $5,391.49
B. Project A, NPV $9,280.90
C. Project A, NPV $7,165.11
D. The Common Life approach cannot be applied to these two projects, due to the fact that the projects share unequal lives.
E. Project B, NPV $9,280.90
Answer: E
Explanation:
Explanation/Reference:
Explanation:
The Common Life, or "Replacement Chain" approach is a method which allows two projects with differing lives to be compared on the basis of NPV or IRR. In analyzing two or more projects using theCommon Life approach, the two projects are multiplied in such a way that each comprises the same amount of time periods. In this example, you are provided with one project that is three periods long, and another which is six periods. By multiplying the three-period project by two, then we are able to formulate a situation in which both projects share a "common life." The calculation of the NPV for Project B assumes the following series of cash flows:
t0: ($20,000)
t1: $7,000
t2: $13,000
t3: [$12,000 + ($20,000)]= ($8,000)
t4: $7,000
t5: $13,000
t6: $12,000
During t3, the project is "replaced," and the $12,000 inflow is offset by the ($20,000) required to implement the project once again. Incorporating this series of cash flows into your calculator will yield a NPV of
$9,280.90 for project B, and this is higher than the NPV of $7,165.11 for project A.
NEW QUESTION: 2
Some application programs can cache file writes on the workstation on which they are run. How can you prevent resulting data integrity issues when using the Agent for Open Files?
A. Configure the application, if possible, to prevent write caching.
B. Enable Extended Features in the Agent for Open Files.
C. Disable retry mechanisms in your backup program.
D. Enable Auto Sense in the Sync Method section of the Agent for Open Files.
Answer: A
NEW QUESTION: 3
CORRECT TEXT
Answer:
Explanation:
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