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Company XYZ is considering two mutually exclusive projects: Project A and Project B. The initial investment required for each project is $500,000. The expected cash
Company XYZ is considering two mutually exclusive projects: Project A and Project B. The initial investment required for each project is $500,000. The expected cash flows for each project are as follows:
Project A: Year 1: $200,000 Year 2: $300,000 Year 3: $400,000 Year 4: $200,000
Project B: Year 1: $150,000 Year 2: $250,000 Year 3: $350,000 Year 4: $450,000
The company's cost of capital is 10%. Calculate the net present value (NPV) for each project and determine which project should be chosen based on the NPV criterion.
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