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8 . A business has two investment choices. Expected cash flows for each alternative are as follows: Project# 1 requires an immediate cash outlay of
A business has two investment choices. Expected cash flows for each alternative are as follows:
Project# requires an immediate cash outlay of $ and is expected to provide a single cash inflow of$ at the end of years.
Project # requires an immediate cash outlay of $ and is expected to provide cash inflows of $ at the end of every year for the next years.
The required rate of return on the investment hurdle rate is compounded annually.
a Find the Internal Rate of Return IRR for each project.
b Find the Net Present Value NPV for each project.
c Find the Profitability Index for each project.
d Given your answers in parts a and b which project is preferred? Briefly explain why.
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