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A firm is considering two mutually exclusive investments, each with an initial outlay of $10,000 and an expected life of 3 years. Assume that the

A firm is considering two mutually exclusive investments, each with an initial outlay of $10,000 and an expected life of 3 years. Assume that the firm has a cost of capital of 12 percent for each project. The two investments are of equal risk and have the following cash flows:

Investment AInvestment B
Cash FlowCash Flow
Year 0-$10,000-$10,000
Year 1$4,000$6,000
Year 2$5,000$6,000
Year 3$11,000$6,000


Calculate the payback period and the net present value for each investment.

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