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A company has $150,000 to be invested in Project C or Project D. The expected cash flows are as follows: Year Project C Project D

A company has $150,000 to be invested in Project C or Project D. The expected cash flows are as follows:

Year

Project C

Project D

1

$50,000

$30,000

2

$50,000

$40,000

3

$50,000

$60,000

4

$50,000

$70,000

5

$50,000

$80,000

The cost of capital is 8%.

Required:
  1. Calculate for each project:
    • Simple payback period
    • Discounted payback period
    • Net present value
    • Internal rate of return
    • Profitability index
  2. Recommend which project to undertake based on your calculations.

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