A company is evaluating two mutually exclusive projects. Project A has an initial cost of $100,000 and
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A company is evaluating two mutually exclusive projects. Project A has an initial cost of $100,000 and is expected to generate cash inflows of $30,000 at the end of each year for five years. Project B has an initial cost of $200,000 and is expected to generate cash inflows of $70,000 at the end of each year for five years. The company has a cost of capital of 12%.
a) Calculate the net present value (NPV) and profitability index (PI) for both projects.
b) Which project should the company choose based on the NPV and PI?
Related Book For
Fundamentals Of Financial Management
ISBN: 9780273713630
13th Revised Edition
Authors: James Van Horne, John Wachowicz
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