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Company B is evaluating two investment opportunities: Project P and Project Q. Project P Cost of Capital: 8% Initial Investment: $140,000 Cash Inflow Year 1:
Company B is evaluating two investment opportunities: Project P and Project Q.
- Project P
- Cost of Capital: 8%
- Initial Investment: $140,000
- Cash Inflow Year 1: $50,000
- Cash Inflow Year 2: $70,000
- Cash Inflow Year 3: $90,000
- Project Q
- Cost of Capital: 10%
- Initial Investment: $180,000
- Cash Inflow Year 1: $60,000
- Cash Inflow Year 2: $80,000
- Cash Inflow Year 3: $100,000
Tasks:
- Calculate the payback period for both projects.
- Determine the NPV for both projects.
- Calculate the IRR for both projects.
- Compare the profitability index of both projects.
- Recommend which project should be undertaken.
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