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Assume the firm can either take Project A or Project B. Project A will require the initial investment of $160,000 and will yield $32,000 at
Assume the firm can either take Project A or Project B. Project A will require the initial investment of $160,000 and will yield $32,000 at Year 1, $25,000 at Year 2, $55,000 at Year 3, $39,000 at Year 4, $55,000 at Year 5 , and $56,000 at Year 6. Project B will require the initial investment of $170,000 and yield $64,000 at Year 1, $25,000 at Year 2, $16,000 at Year 3, $18,000 at Year 4, $39,000 at Year 5, and $115,000 at Year 6. If the interest/discount rate that applies to both project is 10.95%, which of these two projects is a better option if the decision is made based on the Net Present Value (NPV) basis? Assume the firm needs to make a "mutually exclusive" decision where taking both projects is not an option because of the firm's inability (i.e. lack of resources) to do so. Project A Project B Neither A nor B We do not have sufficient information to answer this
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