Unequal lives-ANPV approach JBL Co. has designed a new conveyor system. Management must choose among three alternative courses of action: (1) The firm can sell the design outright
to another corporation with payment over 2 years. (2) It can license the design to another manufacturer for a period of 5 years, its likely product life. (3) It can manufacture and market the
system itself; this alternative will result in 6 years of cash inflows. The company has a cost of capital of 12.4%. Cash flows associated with each alternative are as shown in the following table.
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Alternative
Initial investment (CFO)
Sell
License
Manufacture
$200,000
$199,600
$449,300
Year (t)
Cash inflows (CF$_t$)
1
$199,200
$249,300
$200,100
2
249,900
99,200
250,000
3
---
80,400
200,100
4
---
60,900
200,100
a. The net present value for the option to sell is $. (Round to the nearest cent.)