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Problem 4 (25 marks): A company has to make a choice between two projects namely P& Q. The initial capital outlay of two projects are
Problem 4 (25 marks): A company has to make a choice between two projects namely P& Q. The initial capital outlay of two projects are $739,000 and $507,000 respectively for P and Q. There will be no scrap value at the end of the life of both the projects. The opportunity cost of capital of the company is 11.5%. The annual income is as under: Year 1 2 3 4 5 6 Project P 15,000 49,610 55,800 52,000 58,900 93,000 73,500 88,200 76,900 85,400 72,350 62,980 66,380 Project Q 12,000 44,649 44,640 41,600 41,230 74,400 51,450 52,920 53,830 59,780 36,175 31,490 33,190 7 8 9 10 11 12 13 Analyze which project is better for the company
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