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Marva Donuts is replacing an old equipment with a more efficient product. Two products are being considered. They have different costs and different cash flows,
Marva Donuts is replacing an old equipment with a more efficient product. Two products are being considered. They have different costs and different cash flows, as shown below: Year Project A Project B 0 -$150.000. -$250,000 1. 50.000 60,000 2 50,000 60,000
3 50,000 120,000 4 50000 120, 000 The required return of Marva is 8% (a) What is the NPV of each project and which product should be chosen? b) Calculate the payback period for each product. If the payback cutoff is 4 years, which project should be chosen?
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