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A firm has two mutually exclusive investment projects (X & Y) to evaluate; both can be repeated indefinitely. Both projects are equally risky and may
A firm has two mutually exclusive investment projects (X & Y) to evaluate; both can be repeated indefinitely. Both projects are equally risky and may be repeated indefinitely The firm's WACC is 12%. Cash Flows of Project X and Project Y: Time Project X Project Y 0 1 100,000 30,000 50,000 70,000 2 70,000 30,000 30,000 30,000 30,000 10,000 3 4 5 19. Which of the below choices is the most CORRECT? * A) NPV of project X is higher than the NPV of project Y by $10,324.7 B) NPV of project Y is higher than the NPV of project X by $10,324.7 C) Project Y is profitable than project X. D) Choices (B) and (C). E) None of the above. 20. Which of the two projects adds the most value to the firm? * A) Project X adds more value to the firm than project Y since the EAA of project X is greater than the EAA of project Y. B) Project Y adds more value to the firm than project X since the EAA of project Y is greater than the EAA of project X. C) Both projects are not profitable and the company should reject both of them. D) None of the above
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