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Consider the following two mutually-exclusive projects and their cash flows: Project A Project B Year 0 -5000 -20000 Year 1 3000 7000 Year
Consider the following two mutually-exclusive projects and their cash flows:\ Project A Project B\ Year 0 -5000 -20000 \ Year 1 3000 7000 \ Year 2 2000 7000 \ Year 3 2000 7000 \ Year 4 2000 7000 \ Year 5 1000 7000 \ The investor compares the two projects using three different rules: Rulel-NPV rule\ Rule II-IRR rule\ Rule III-Payback rule with a payback period <=2 years\ \ Assuming that the cost of capital for both projects is 10%, the investor should pick Project A over Project B following: Answer Rules II and III
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