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The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: The
The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows:
The wind turbines require an investment of $ while the biofuel equipment requires an investment of $ No residual value is expected from either project.
Required:
b Compute a present value index for each project. If required, round your answers to two decimal places.
Present Value Index
Wind Turbines
Biofuel Equipment
Wind Turbines Biofuel Equipment
Present value factor for an annuity of $
Internal rate of return
The net present value, present value index, and internal rate of return all indicate that the
isare a better financial opportunity compared to the
although both investments meet the minimum return criterion of
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