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I was told to revise because " The wording of this question may indicate that you intend to submit a tutor's work as your own. Please revise...

I was told to revise because "The wording of this question may indicate that you intend to submit a tutor's work as your own. Please revise accordingly."

This question needs to be answered for studying purposes. It is not intended to be submitted for grading. I hope this clarifies the situation


Question:

JBL Co. has designed a new conveyor system. Management must choose among three alternative courses of action: (1) The firm can sell the design outright to another corporation with payment over 2 years. (2) It can license the design to another manufacturer for a period of 5 years, its likely product life. (3) It can manufacture and market the system itself; this alternative will result in 6 years of cash inflows. The company has a cost of capital of 12.1%. Cash flows associated with each alternative are as shown in the following table.


Table.png


a. Calculate the net present value of each alternative and rank the alternatives on the basis of NPV.

b. Calculate the annualized net present value​ (ANPV) of each alternative and rank them accordingly.

c. Why is ANPV preferred over NPV when ranking projects with unequal​ lives?

Table.png

Top Answer

Ranking of projects based on NPV 1)Manufacturing 2)Licencing 3)Selling Ranking based on ANPV 1)Selling... View the full answer

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