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DEF Tech is considering two new projects, Project Delta and Project Sigma. Project Delta: Year Cash Flow ($) Year 0 -80,000 Year 1 10,000 Year
DEF Tech is considering two new projects, Project Delta and Project Sigma.
Project Delta:Year | Cash Flow ($) |
Year 0 | -80,000 |
Year 1 | 10,000 |
Year 2 | 30,000 |
Year 3 | 20,000 |
Year 4 | 40,000 |
Year | Cash Flow ($) |
Year 0 | -90,000 |
Year 1 | 25,000 |
Year 2 | 25,000 |
Year 3 | 25,000 |
Year 4 | 25,000 |
The discount rate for both projects is 11%.
Requirements: a) Calculate the payback period for each project. b) Identify which project should be chosen if the company requires a payback period of 3 years. c) Calculate the IRR for each project. d) Determine which project should be accepted based on the IRR rule. e) Calculate the NPV for each project and recommend which project should be accepted based on NPV.Step by Step Solution
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