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Ciara Corp. is considering two mutually exclusive projects. The (after-tax) free cash flow for each project and year is given below: Year Project A Project
Ciara Corp. is considering two mutually exclusive projects. The (after-tax) free cash flow for each project and year is given below:
Year | Project A | Project B |
---|---|---|
0 | -53,000 | -72,000 |
1 | 20,000 | 30,000 |
2 | 25,000 | 25,000 |
3 | 30,000 | 20,000 |
4 | 15,000 | |
5 | 10,000 |
The relevant discount rate is 10% for both projects.
Part 1: What is the net present value of project A?
Part 2: What is the net present value of project B?
Part 3: What is the equivalent annual annuity (annualized NPV) of project A?
Part 4: What is the equivalent annual annuity (annualized NPV) of project B?
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