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A company is evaluating two projects with the following cash flows: Project A: Initial Investment: $1,000,000 Year 1: $300,000 Year 2: $300,000 Year 3: $400,000
A company is evaluating two projects with the following cash flows:
Project A:
- Initial Investment: $1,000,000
- Year 1: $300,000
- Year 2: $300,000
- Year 3: $400,000
- Year 4: $500,000
Project B:
- Initial Investment: $1,000,000
- Year 1: $200,000
- Year 2: $400,000
- Year 3: $500,000
- Year 4: $600,000
The discount rate for both projects is 10%.
Questions:
- Calculate the NPV for Project A and Project B.
- Determine the IRR for both projects.
- Which project should the company choose based on NPV and IRR? Justify your answer.
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