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Epsilon Pharmaceuticals is analyzing two research projects. Each project requires an initial investment of $100,000 and has the following expected cash flows: Year Cash Flows

Epsilon Pharmaceuticals is analyzing two research projects. Each project requires an initial investment of $100,000 and has the following expected cash flows:

Year

Cash Flows (Project C)

Cash Flows (Project D)

0

-100,000

-100,000

1

30,000

20,000

2

30,000

20,000

3

30,000

30,000

4

30,000

30,000

5

30,000

40,000

a. Determine the payback period for both projects. b. Which project should be selected based on the net present value method, assuming a discount rate of 5%?

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