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A company is considering investing $300,000 in either Project A or Project B with the following cash flows: Year Project A Project B 1 $90,000
A company is considering investing $300,000 in either Project A or Project B with the following cash flows:
Year | Project A | Project B |
1 | $90,000 | $20,000 |
2 | $90,000 | $50,000 |
3 | $90,000 | $70,000 |
4 | $90,000 | $150,000 |
5 | $90,000 | $60,000 |
The current cost of capital is 10%.
Required:a) Calculate for each project the:
- Simple payback period
- Discounted payback period
- Net present value
- Internal rate of return
- Profitability index
b) Based on your results in (a) above, advise the firm.
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