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A company with an investment budget of $350,000 is evaluating Project E and Project F with the following cash flows: Year Project E Project F

A company with an investment budget of $350,000 is evaluating Project E and Project F with the following cash flows:

Year

Project E

Project F

1

$80,000

$20,000

2

$70,000

$30,000

3

$60,000

$40,000

4

$50,000

$50,000

5

$40,000

$60,000

The discount rate is 11%.

Required: a) Calculate for each project:

  • Simple payback period
  • Discounted payback period
  • Net present value
  • Internal rate of return
  • Profitability index

b) Recommend the better project based on the results.

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