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Kindly show calculations and answer fast please. Breton Co is also considering which of two mutually exclusive projects it should undertake. The finance director thinks
Kindly show calculations and answer fast please.
Breton Co is also considering which of two mutually exclusive projects it should undertake. The finance director thinks that the project with the higher NPV should be chosen, whereas the managing director thinks that the one with the higher IRR should be undertaken, especially as both projects have the same initial outlay and length of life. The company anticipates a cost of capital of 10%, and the net after tax cash flows of the projects are as follows: Year 0 1 2 3 4 5 Project Project Y Rs000 Rs000 (200) (200) 35 218 80 10 90 10 75 4 20 3 Required: (a) Calculate the NPV and IRR of each project. (11 marks) (b) Recommend, with reasons, which project you would undertake (if either). (2 marks) (c) Briefly explain the inconsistency in ranking of the two projects in view of the remarks of the directors. (2 marks)Step by Step Solution
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