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Chestnut Tree Farms has identified the following two mutually exclusive projects. The company uses a discount rate of 6%. Year Cash Flow (A) Cash Flow
Chestnut Tree Farms has identified the following two mutually exclusive projects. The company uses a discount rate of 6%.
Year | Cash Flow (A) | Cash Flow (B) | ||||
0 | -38,000 | -38,000 |
| |||
1 | 10,735 | 16,530 |
| |||
2 | 14,060 | 13,395 |
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3 | 13,015 | 12,255 |
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4 | 7,505 | 2,090 |
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- What is the IRR of each project? Based on the IRR criterion, which project(s) would you choose?
- What is the NPV of each project? Based on the NPV method which project(s) would you choose?
- What is your final choice of project?
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