K&N Footwear expands its scope into renewable energy business. The company is considering investing in two projects: Solar Park or Wind Farm. Setup of the solar park will cost $42 million and will generate $15 million per annum for 5 years. The wind farm will cost $60 million and will generate $14 million for 10 years. K&N Footwear’s cost of capital is 10%. a. Determine which project the company should invest in, using replacement chain (common life) method? Answer b. What is the EAA (equivalent annual annuity) for the Solar Park project?
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