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There are two projects that need to be evaluated to determine the feasibility of the project. The company cannot do both - they are mutually
There are two projects that need to be evaluated to determine the feasibility of the project. The company cannot do both - they are mutually exclusive. The cash flows are:
Point in Time (yearly) | Project A | Project B |
0 | -420 000 | -100 000 |
1 | 150 000 | 75 000 |
2 | 150 000 | 75 000 |
3 | 150 000 | 0 |
4 | 150 000 | 0 |
The company's required rate of return is 15%.
1.1 Calculate the internal rate of return (IRR) for each project.
1.2 Calculate the net positive value (NPV) for each project.
1.3 Compare and explain the results in (1.1) and (1.2) and indicate which project the company should undertake and why.
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