Contemporary Engineering Economics 6th Edition by Chan Park

تمرين 17

A firm has invested in and is currently receiving benefits from project A. The current value of project A is $4M. In next five years, the firm will have the option to use most of the same equipment from project A and switch to project B. Switching over would entail a $2M investment cost. The expected net cash inflow of project B is $1M per annum for 10 years. What is the total value of this investment scenario Assume that MARR = 12%, r = 6%, and a = 50%.