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A company is trying to decide which of two new product lines to introduce in the coming year. The company requires a 12% return on
A company is trying to decide which of two new product lines to introduce in the coming year. The company requires a 12% return on investment. The predicted revenue and cost data for each product line follows: The company has a 30% tax rate and it uses the straight-line depreciation method. The present value of an annuity of 1 for 5 years at 12% is 3.6048. a. Compute the net present value for each piece of equipment under each of the two product lines; b. Compute the project profitability index for each product; c. Compute the payback period for each product. Which, if either of these two investments is acceptable
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