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Capital Budgeting Techniques Problem 1: Cash flow streams for two mutually exclusive projects are given below. After-Tax Cash Inflows Year Project A Project B 1
Capital Budgeting Techniques Problem 1: Cash flow streams for two mutually exclusive projects are given below. After-Tax Cash Inflows Year Project A Project B 1 $300 $600 2 $400 $200 3 $ 50 $100 4 $ 50 $700 Project A requires an initial investment of $600, and project B requires an initial investment of $1,000. a. Use the payback period to determine which project should be selected. b. If the opportunity cost is 8%, determine the net present value for both projects. c. Which project should be chosen? What are the drawbacks of the payback period method
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