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Cedric Inc. is considering two mutually exclusive projects. Project 1 requires an investment of $100,000 while project 2 requires an investment of $110,000. Revenues and
Cedric Inc. is considering two mutually exclusive projects. Project 1 requires an investment of $100,000 while project 2 requires an investment of $110,000. Revenues and costs for each project are shown below. PROJECT 1 Year Revenues Variable costs 1 2 3 $40,000 $60,000 $70,000 $80,000 10,000 15,000 20,000 20,000 5,000 5,000 6,000 8,000 PROJECT 2 Fixed costs Year 1 2 Revenues Variable costs $60,000 20,000 7.000 $75,000 25,000 7.000 $51,000 17,000 7.000 $45,000 15,000 8.000 Fixed costs The company estimates that at the end of the fourth year Project I would have a salvage value of $20,000 and Project 2 would have a salvage value of $10,000. a) Determine the net present value of each project using a 14% discount rate
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