Question
EFG Corp. has two investment options. Both projects require an initial investment of $75,000. The expected cash flows are as follows: Year Project 1 (USD)
- EFG Corp. has two investment options. Both projects require an initial investment of $75,000. The expected cash flows are as follows:
Year | Project 1 (USD) | Project 2 (USD) |
0 | (75,000) | (75,000) |
1 | 25,000 | 20,000 |
2 | 30,000 | 25,000 |
3 | 35,000 | 30,000 |
4 | 40,000 | 35,000 |
5 | 45,000 | 40,000 |
Requirements: a. Calculate the IRR for both projects. b. Compute the payback period for both projects. c. Based on IRR, which project should EFG Corp. invest in and why?
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Accounting What the Numbers Mean
Authors: David Marshall, Wayne McManus, Daniel Viele
11th edition
1259535312, 978-1259535314
