Rank these investments based on their npvs- rank these


Contract Manufacturing, Inc. is considering two alternative investment proposals. The first proposal calls for a major renovation of the company's manufacturing facility. The second involves replacing just a few obsolete pieces of equipment in the facility.

The company will choose one project or the other this year, but it will not do both. The cash flows associated with each project appear below, and the firm discounts project cash flows at 15 percent.

Year

Renovate

Replace

0

-$9,000,000

-$1,000,000

1

3,500,000

600,000

2

3,000,000

500,000

3

3,000,000

400,000

4

2,800,000

300,000

5

2,500,000

200,000

a. Rank these investments based on their NPVs.

b. Rank these investments based on their IRRs.

c. Why do these rankings yield mixed signals?

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Financial Management: Rank these investments based on their npvs- rank these
Reference No:- TGS01731340

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