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Unformatted text preview: project's cash flows are identical to the first set of cash flows, then the replicated NPV is also $4,132, but it "comes in" in year 2. We can put project S's cash flow situation on a time line: 0 1 2 3 4 | | | | | 10% 4,132 4,312 3,415 7,547 Here we see that S's common life NPV is NPV S = $7,547. Thus, when compared over a 4-year common life, project s has the higher NPV, hence it should be chosen. Project s would have the higher NPV over any common life. Mini Case: 11 - 44...
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08