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5. What is the PI of projects A and B? -Which project would you accept on the basis of PI? 6. What is the IRR
5. What is the PI of projects A and B? -Which project would you accept on the basis of PI?
6. What is the IRR of projects A and B? - Which project would you accept on the basis of IRR?
7. Is there a conflict between the methods?
8. Which project(s) would you accept and why? -What would be your answer to above if the projects were independent?
Your firm has estimated the following cash flows for two mutually exclusive capital investment projects. The firm's required rate of return is 10%. The firm uses 3 years as the cutoff for payback period method. Year Project ACash Flow -$185,000 55,000 55,000 55,000 45,000 45,000 45,000 Project B Cash Flow -$410,000 120,000 120,000 110,000 110,000 90,000 60,000 4Step by Step Solution
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