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Consider two competing investments in computer equipment. Each calls for an initial cash outlay of P100, and each returns P200 over the next five years
Consider two competing investments in computer equipment. Each calls for an initial cash outlay of
P100, and each returns P200 over the next five years making for a net gain of P100. But the timing of
the returns is different, as shown in the table below (Company A Limited and Company B Limited), and
therefore the present value of each year's gains is different. Using a 10% discount rate compute the
Net Present Value (NPV) of A Limited and B Limited and ascertain which company generates
better NPV.
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