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It is known that two alternative projects A and B each require investment funds for project A = IDR 600,000, and project B = IDR
It is known that two alternative projects A and B each require investment funds for project A = IDR 600,000, and project B = IDR 720,000, - the age of each investment is 6 years.
The profit after taxes for projects A and B are estimated as follows
Project Year A Project B
1 IDR 200,000 IDR 450,000
2 IDR 200,000 IDR 220,000
3 IDR 200,000 IDR 200,000
4 IDR 200,000 IDR 130,000
5 IDR 200,000 IDR 130,000
6 IDR 200,000 IDR 130,000
If the depreciation method used is the straight-line method without Salvage Value, and the Cost Of Capital is estimated at 15.25%, then which project is selected based on:
a. Net present value for both projects (NPV)
b. Profitability Index (PI)
c. Internal rate of return (IRR)
d. Pay Back Period
e. Which one should be accepted from the two investment proposals, give the reasons?
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