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Drawbacks to the payback project evaluation method include: a) ignoring the time value of money. Ob) an arbitrary acceptance/rejection criterion. Oc) ignoring cash flows which
Drawbacks to the payback project evaluation method include: a) ignoring the time value of money. Ob) an arbitrary acceptance/rejection criterion. Oc) ignoring cash flows which occur after the payback period. d) Both A and B e) all of the above Both projects are of equal risk and have a required return of 13.5%. Assuming the firm has $47.500 available for investment, which project(s), if any, should be selected? Project Project AB Initial $50,000 $45,000 Investment NPV $7,500 $7,150 IRR 14.1% 14.9% a) Both projects should be selected: both have positive NPVs and IRRs which exceed the required return. b) Both projects should be rejected: neither project has a return of at least 20%. c) Project B should be selected: it has a positive NPV and the firm cannot afford to invest in Project A. d) Project A should be selected: it has the highest positive NPV. e) Project B should be selected: it has the highest IRR which is above the required return
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