A firm is considering two projects. Both have an initial investment of $1,000,000 and pay off over
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A firm is considering two projects. Both have an initial investment of $1,000,000 and pay off over the next 5 years in this fashion. The cost of capital is 8 percent.
a. Which of these has a faster payback period?
b. Which of these options has a higher net present value?
c. Which of these options has a higher internal rate of return (IRR)?
Transcribed Image Text:
Year Year O Year 1 Year 2 Year 3 Year 4 Year 5 Option 1 - 1,000,000 1,000,000 100,000 200,000 300,000 400,000 Option 2 -1,000,000 500,000 500,000 400,000 300,000 200,000
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a Option 1 has a faster payback period b Option 2 has a higher net present value c Op...View the full answer
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Related Book For
Accounting Information Systems
ISBN: 9781260571080
3rd International Edition
Authors: Vernon Richardson
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