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A&B Enterprises is trying to select the best investment from among four alternatives. Each alternative involves an initial outlay of $100,000. Their cash flows follow:
A&B Enterprises is trying to select the best investment from among four alternatives. Each alternative involves an initial outlay of $100,000. Their cash flows follow:
Year | A | B | C | D |
1 | $10,000 | $50,000 | $25,000 | $0 |
2 | 20,000 | 40,000 | 25,000 | 0 |
3 | 30,000 | 30,000 | 25,000 | 45,000 |
4 | 40,000 | 0 | 25,000 | 55,000 |
5 | 50,000 | 0 | 5,000 | 60,000 |
Evaluate and rank each alternative based on a) payback period, b) net present value (use a 10% discount rate), and c) internal rate of return.
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