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2. Two options have been brought forward by the engineering department for you to make a decision on which is the better and more
2. Two options have been brought forward by the engineering department for you to make a decision on which is the better and more viable investment for the company: Option #1: Project Kappa In this Project an investment of $1,150,000 can be made that will see revenue streams of $300,000 per annum and an average expense of $135,000 per annum. I There is a salvage value of $250,000 for this project at the end of its useful life. Option #2: Project Gamma In this Project an investment of $1,250,000 can be made that will see revenue streams of $400,000 per annum and an average expense of $155,000 per annum. There is a salvage value of $200, 000 for this project at the end of its useful life. For both projects it is estimated that the internal rate of return is 8.75%. Also, the useful life for EACH project is 5 years. You are required to determine: (i) The Net Future Worth of EACH project. (ii) The Net Present Value of EACH project. (iii)The Payback Period of EACH project. (iv)Your decision, clearly stating why. [3 marks] [3 marks] [1 mark] [1 mark]
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