Projects 1 and 2 have similar outlays, although the patterns of future cash flows are different. The

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Projects 1 and 2 have similar outlays, although the patterns of future cash flows are different. The cash flows as well as the NPV and IRR for the two projects are shown below. For both projects, the required rate of return is 10%.

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The two projects are mutually exclusive. What is the appropriate investment decision?
A. Invest in both projects.
B. Invest in Project 1 because it has the higher IRR.
C. Invest in Project 2 because it has the higher NPV.

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Corporate Finance A Practical Approach

ISBN: 9781118217290

2nd Edition

Authors: Michelle R Clayman, Martin S Fridson, George H Troughton, Matthew Scanlan

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Question Posted: Mar 29, 2024 12:00 AM

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Projects 1 and 2 have similar outlays, although the patterns of future cash flows are different. The

Question:

Cash Flows Year 0 1 2 3. 4 NPV IRR Project 1 -50 20 20 20 20 13.40 21.86% Project 2 -50 0 0 0 100 18.30 18.92%

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Corporate Finance A Practical Approach

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