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Company Y is analyzing three projects: Project A, Project B, and Project C. Project A Cost of Capital: 9% Initial Investment: $130,000 Cash Inflow Year
Company Y is analyzing three projects: Project A, Project B, and Project C.
- Project A
- Cost of Capital: 9%
- Initial Investment: $130,000
- Cash Inflow Year 1: $40,000
- Cash Inflow Year 2: $50,000
- Cash Inflow Year 3: $60,000
- Scrap Value at Year 3: $8,000
- Project B
- Cost of Capital: 11%
- Initial Investment: $170,000
- Cash Inflow Year 1: $50,000
- Cash Inflow Year 2: $60,000
- Cash Inflow Year 3: $70,000
- Scrap Value at Year 3: $6,000
- Project C
- Cost of Capital: 10%
- Initial Investment: $200,000
- Cash Inflow Year 1: $60,000
- Cash Inflow Year 2: $70,000
- Cash Inflow Year 3: $80,000
- Scrap Value at Year 3: $4,000
Tasks:
- Calculate the payback period for each project.
- Determine the NPV for each project.
- Calculate the IRR for each project.
- Compare the profitability index for each project.
- Make a recommendation on which project to select.
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