Aswath Damodaran 230
Solution 1 : Project Replication
Project A: Replicated
- $ 1500
$ 350 $ 350 $ 350 $ 350 $ 350 $^350 $^350 $^350 $^350 $^350
Project B
- $ 1000
$ 400 $ 400 $ 400 $ 400 $ 400 $ 400 $ 400 $ 400 $ 400 $ 400
NPV of Project A replicated = $ 693
NPV of Project B= $ 478
Here, we have done the replication assuming that the cash flows are identical for
the second replication. (This does not have to be the case)
This process will become more complicated if you are comparing projects with
7 and 9 year lives, for instance.
