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Two investments, G and H, have the following projected cash flows. Investment G requires an initial investment of $40,000, and Investment H requires $45,000. Year

Two investments, G and H, have the following projected cash flows. Investment G requires an initial investment of $40,000, and Investment H requires $45,000.

Year

Investment G

Investment H

1

$10,000

$15,000

2

$15,000

$12,000

3

$20,000

$10,000

4

$25,000

$8,000

a) Calculate the NPV for each investment using a discount rate of 7%.
 b) Determine the profitability index for each investment.
 c) State your accept/reject decision for each investment if they are mutually exclusive.
 d) Calculate the payback period for each investment.
 e) Analyze the sensitivity of each investment's NPV to a 2% increase in the discount rate.

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