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The folloiwnginformation is supplied in the assignment Payback Period: Gas Station A is paid back in 2 years; CF1 in year 1, and CF2 in
The folloiwnginformation is supplied in the assignment
- Payback Period:Gas Station A is paid back in 2 years; CF1 in year 1, and CF2 in year 2. Gas Station B is paid back in one (1) year. According to the payback period, when given the choice between two mutually exclusive projects, the investment paid back in the shortest time is selected.Remember - the fastest is always the best
- Net Present Value:Consider the gas station example above under the NPV method, and a discount rate of 10%:
- NPVgas station A=$32,644
- NPVgas station B=$16,115Differentiatebetween the possibility of completing one or both projects based on their NPV
- Internal Rate of Return:for Station A is 41.421%.; for Station B, 36.602.
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