Question
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 11 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.
| Time: | 0 | 1 | 2 | 3 |
| Project A Cash Flow | -38,000 | 28,000 | 48,000 | 19,000 |
| Project B Cash Flow | -48,000 | 28,000 | 38,000 | 68,000 |
Use the NPV decision rule to evaluate these projects; which one(s) should it be accepted or rejected?
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Contemporary Issues In Quantitative Finance
Authors: Ahmet Can Inci
1st Edition
1032101121, 978-1032101125
