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answer explain with formulas Bunnings Ltd is considering to invest in one of the two following projects to buy a new equipment. Each equipment will

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answer explain with formulas

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Bunnings Ltd is considering to invest in one of the two following projects to buy a new equipment. Each equipment will last 5 years and have no salvage value at the end. The company's required rate of return for all investment projects is 8%. The cash flows of the projects are provided below. Equipment 1 Equipment 2 Cost $186,000 $195,000 Future Cash Flows Year 1 86 000 97 000 Year 2 93 000 84 000 Year 3 83 000 86 000 Year 4 75 000 75 000 Year 5 55 000 63 000 Required: a) Identify which option of equipment should the company accept based on Profitability Index ? ( 4 marks ) b) Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 2 years

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