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8. Chapter MC.10A-004, Section MC.10A-004, Problem MC.10A-004 Dorati Inc. is considering two mutually exclusive projects. Dorati used a 15% required rate of return to evaluate
8. Chapter MC.10A-004, Section MC.10A-004, Problem MC.10A-004 Dorati Inc. is considering two mutually exclusive projects. Dorati used a 15% required rate of return to evaluate capital expenditure projects. Assuming the two projects have the costs and cash flows shown below, determine the NPV for each using a replacement chain. Year 0 Projects -$70,000 $50,000 $60,000 1 2 Project T -$100,000 $ 60,000 $ 70,000 $ 80,000 $ 90,000 3 4 Assume in two years Project S will still cost $70,000 and produce the same two years of cash flows. ca. NPVs = $14,690: NPV1 = $109,240 b. NPV = $40,020: NPV = $109,240 C. NPVs = $8,860: NPV1 = $109,240 d. None of these choices are correct
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