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A company has $275,000 to invest in either project M or project N with the following cash flows: Year Project M Project N 1 $85,000

A company has $275,000 to invest in either project M or project N with the following cash flows:

Year

Project M

Project N

1

$85,000

$25,000

2

$85,000

$55,000

3

$85,000

$95,000

4

$85,000

$105,000

5

$85,000

$70,000

The applicable discount rate is 11%.

Required:

  1. Calculate for each project:
    • Simple payback period
    • Discounted payback period
    • Net present value
    • Internal rate of return
    • Profitability index
Advise the firm based on the results of the analysis.

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