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Period Annual Cash Flows Project A Annual Cash Flows Project B 0 (25,000) (25,000) 1 5,000 20,000 2 10,000 10,000 3 15,000 8,000 4 20,000

Period Annual Cash Flows Project A Annual Cash Flows Project B
0 (25,000) (25,000)
1 5,000 20,000
2 10,000 10,000
3 15,000 8,000
4 20,000 6,000

Big Company is evaluating two projects, Project A and Project B. Both projects are of equal risk. Big Company has a WACC of 10%. The expected free cash flows of the projects are as follows

A. Compute the Net Present Value of Project A

B. The Net Present Value of Project B is $11,554.88. If projects A and B are independent, considering only at the NPV method, which projects(s) should Big Company proceed with? Explain your answer.

C. The Net Present Value of Project B: is $11,554.88 A and B are mutually exclusive, considering only at the NPV method, which project(s) should Big Company proceed with? Explain your answer

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