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A company is considering two new projects, A and B. The following data is available: Project A Project B Cost of Capital 10% 12% Initial
A company is considering two new projects, A and B. The following data is available:
Project A | Project B | |
Cost of Capital | 10% | 12% |
Initial Investment | $200,000 | $250,000 |
Cash Inflow Year 1 | $60,000 | $70,000 |
Cash Inflow Year 2 | $80,000 | $90,000 |
Cash Inflow Year 3 | $100,000 | $110,000 |
Cash Inflow Year 4 | $120,000 | $130,000 |
Requirements:
- Calculate the payback period of each project.
- Calculate the net present value (NPV) of each project.
- Determine the internal rate of return (IRR) for each project.
- Provide a recommendation on which project to select and justify your choice.
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