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Gayle, Henry and Wright Ltd. has to decide between two competing projects being offered by Codling and Small. The cashflows and the discount rates for
Gayle, Henry and Wright Ltd. has to decide between two competing projects being offered by Codling and Small. The cashflows and the discount rates for the projects are shown below. Year Codling Small 0 -$4,000,000 -$5,000,000 1 $1,000,000 $1,200,000 2 $1,000,000 $1,200,000 3 $1,000,000 $1,200,000 4 $1,000,000 $1,200,000 5 $1,000,000 $1,200.000 Discount Rate 9% (a) Use the Profitability Index method to determine which project should be chosen. 6 marks) (b) State reason(s) for your answer in (a) above. (1 mark) 6%
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