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Two properties are expected to have the cash flows shown in the table. The required investment for each is $200,000. Assume funds are available to
Two properties are expected to have the cash flows shown in the table. The required investment for each is $200,000. Assume funds are available to invest in only one property and your cost of capital (or return hurdle) is 10%. Which property would you select and what is the NPV for that project? Year 1 2 3 4 5 6 7 8 9 10 Property 1 $45,000 $45,000 $45,000 $30,000 $20,000 $9,000 $5,000 $3,000 $2,000 $200,000 Property 2 $8,000 $14,000 $28,000 $28,000 $28,000 $28,000 $32,000 $32,000 $34,000 $270,000 O Property 2; NPV = $42,060.54 Property 2; NPV = $142,060.54 Property 1; NPV = $42,060.54 Property 1; NPV = $142,060.54
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