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Gagah Perkasa Berhad is considering two mutually exclusive projects with depreciable lives of three and six years. The after-tax cash flow for projects A and
- Gagah Perkasa Berhad is considering two mutually exclusive projects with depreciable lives of three and six years. The after-tax cash flow for projects A and B are listed below.
Year | Project A | Project B |
0 | (100,000) | (100,000) |
1 | 51,250 | 33,126 |
2 | 51,250 | 33,126 |
3 | 51,250 | 33,126 |
4 |
| 33,126 |
5 |
| 33,126 |
6 |
| 33,126 |
The required rate of return on these projects is 15 percent.
- Using the net present value (NPV) technique, determine which project should be accepted.
(8 marks)
- State your reason.
(1 mark
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