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The Meacham Tire Company is considering two mutually exclusive projects with useful lives of 3 and...

  1. The Meacham Tire Company is considering two mutually exclusive projects with useful lives of 3 and 6 years. The after-tax cash flows for projects S and L are listed below.

Year

Cash Flow S

Cash Flow L

0

-$60,000

-$115,000

1

38,000

28,500

2

25,000

49,500

3

35,000

26,850

4

22,600

5

18,750

6

23,500

The required rate of return on these projects is 14-percent. What decision should be made (i.e., which project should be accepted, if indeed any project should be accepted?

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Project S should be accepted

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