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As a business executive, you must choose between two alternative investments, A and B, which you will hold for three years and then sell. The
As a business executive, you must choose between two alternative investments, A and B, which you will hold for three years and then sell. The WACC of your company is 9%. Both investments require $250,000 to be paid upfront (Year 0). Thereafter, Investment A has cashflows for each subsequent year of $140,000, $140,000, and $190,000 (years 1-3, resp.). Investment B has cashflows for each subsequent year of $5,000, $15,000, and $400,000 (years 1-3, resp.). Which of the following statements is true? Question 17 options: Project B has a lower net present value. Project A has a faster payback. Project A has a higher profitability index. All of the other statements are true
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