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2. Real Time Systems Inc. is considering the development of one of two mutually exclusive new computer models. Each will require a net investment of
2. Real Time Systems Inc. is considering the development of one of two mutually exclusive new computer models. Each will require a net investment of $5,000. The cash flow figures for each project are shown below: Period Project A Project B 1 $2,000 $3,000 2,500 2,600 2 3 2,250 2,900 R=12% Rb=12+2%=14% Model B, which will use a new type of laser disk drive, is considered a high-risk project, while Model A is of average risk. Real Time adds 2 percentage points to arrive at a risk- adjusted discount rate when evaluating a high-risk project. The rate used for average risk projects is 12 per cent. What model you will choose to develop
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