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You are considering projects A and B as shown below and your firm has an 8% required rate of return. Project A Project B Year
- You are considering projects A and B as shown below and your firm has an 8% required rate of return.
| Project A |
| Project B | ||
Year | Cash Flow | Net Income |
| Cash Flow | Net Income |
0 | -168,000 | -200,000 | |||
1 | 56,500 | 12,905 | 56,000 | 16,240 | |
2 | 82,000 | 18,860 | 36,000 | 8,280 | |
3 | 48,000 | 14,880 | 26,500 | 37,510 | |
4 | 45,000 | 5,850 | 121,000 | 2,385 | |
5 | 30,000 | 7,540 |
| 81,000 | 23,490 |
Avg Book Value | 28,250 |
|
| 53,125 |
- Calculate the NPV of each project.(5)
- Calculate the Payback Period of each project.(5)
- Calculate the Average Accounting Return of each project.(5)
- If these projects are independent, which one(s) should be accepted? Why?(3)
e. If these projects are mutually exclusive, which one(s) should be accepted? Why?(3)
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