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A company is considering two projects with the following cash flows. Determine which project should be chosen based on the NPV and IRR methods if
A company is considering two projects with the following cash flows. Determine which project should be chosen based on the NPV and IRR methods if the discount rate is 10%.
Project A Cash Flows:
- Year 0: -$100,000
- Year 1: $40,000
- Year 2: $50,000
- Year 3: $60,000
Project B Cash Flows:
- Year 0: -$100,000
- Year 1: $60,000
- Year 2: $50,000
- Year 3: $40,000
Requirements:
- Calculate the NPV for both projects.
- Calculate the IRR for both projects.
- Determine which project should be chosen based on NPV.
- Determine which project should be chosen based on IRR.
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