Kaneb Is Evaluating Two Alternative Pipeline Welders

question 15

Multiple Choice

Kaneb is evaluating two alternative pipeline welders.Welder A costs $310,000, has a 7 year life, and is expected to generate net cash inflows of $78,000 in each of the 7 years.Welder B costs $320,000, has a 5 year life, and is expected to generate annual net cash inflows of $68,900 in each of the 5 years.Kaneb's cost of capital is 16%.Using the equivalent annual annuity method, which alternative should be chosen and what is its NPV?

• A)B, $4,920
• B)A, $7,111
• C)B, $10,650
• D)A, $7,800

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Definitions:

Uterine Wall

The muscular layer of the uterus, also known as the myometrium, which expands during pregnancy and contracts during labor.

Endometriosis

A condition in which tissues that make up the lining of the uterus grow outside the uterus.

Uterine Lining

The inner layer of the uterus, known as the endometrium, which thickens during the menstrual cycle in preparation for potential pregnancy.

Uterus

A female reproductive organ where a fertilized egg implants and grows during pregnancy.