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You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value. Project A: Year: 0, 1, 2, 3 Cash Flow: -$87,000; $31,000; $37,000; $44,000 Required rate of return: 12% Required payback period: 2.5 years Required accounting return: 10% Project B Year: 0, 1, 2, 3 Cash Flow: -$85,000; $15,000; $20,000; $90,000 Required rate of return: 14% Required payback period: 2.5 years Required accounting return: 11% Should you accept or reject these projects based on payback analysis? A. accept Project A and reject Project B B. reject Project A and accept Project B C. accept both Projects A and B D. reject both Projects A and B E. You cannot make this decision based on payback analysis
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