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A firm is considering a future investment. Describe which types of cashflows the firm should or should not include in its investment decisions and why.
A firm is considering a future investment. Describe which types of cashflows the firm should or should not
include in its investment decisions and why.
b If a firm is considering two investments that would be expected to have cashflows that occur annually as
detailed below evaluate the investments using NPV payback, discounted payback and PI assuming a discount
rate of Which project should the firm choose and why? If they could invest in both should they?
Project A Project B
Now
year
years
years
years
c How would the company decide on what discount rate to use for these calculations?
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