Q88- Mock Exam 2 Afternoon one, trouble, multiple, conclusion, into

dandman

Edit- this is for Schweser
It has a chart of cashflows and NPVs. There are two projects where one lasts two years and one lasts three years.

So in the multiple of common lives approach the answer say to NPV the projects over 6 years (which make sense).

I lazily just multplied the NPVs by 2 and 3 respectively to arrive at the same conclusion.

When the answer in the back had you do all the work, it made me wonder if you can get into trouble multipying the NPV's

It seems like since the NPVs already capture time value of money you should be able to multiple by the number of times you use the project.

Can anyone confirm?



Edited 1 time(s). Last edit at Sunday, May 29, 2011 at 03:31PM by stingreye.