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Question 3 (4pts). You are considering two possible projects (Project A and Project B). The real discount rate is 14%, and the inflation rate is
Question 3 (4pts). You are considering two possible projects (Project A and Project B). The real discount rate is 14\%, and the inflation rate is 2.5%. Which project you think the company should select based on NPV and IRR analysis? Evaluate each project using the discrete method of discounting. Project A: - Requires an initial investment of \$6.4 million this year (year 0) and a second investment of \$4 million next year (year 1). - The project would break even in the second year (earn zero) but would earn positive returns of \$1.2 million, \$3.5 million, \$7.1 million, and \$12.6 million (year 6 ) in the following 4 years. Project B: - Requires an initial investment of \$18 million (year 0) but would not earn (or cost) anything until the end of Year 5 when you think it would return approximately $45 million
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