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You are your firm's new financial consultant. You have been asked to consider two mutually exclusive investment opportunities. Both cost $15,000 up front. Their
You are your firm's new financial consultant. You have been asked to consider two mutually exclusive investment opportunities. Both cost $15,000 up front. Their cash flow patterns are significantly different however. In fact, their NPV profiles cross at .083737. You have the details on one of these opportunities and the cash flows are: Year 0 S -15,000 1 2334 8,000 7,000 3,000 1,000 The only information you have on the other opportunity's cash flows is that they are also in years 1-4 and they are the same amount each year (not the same as the other opportunity's cash flows but equal in years 1-4). What is this equal cash flow? (3 points-all or nothing) Discuss how the allocation of overhead costs after a project is accepted can be troublesome to a manager who recommended a project during the capital budgeting process. (3 points) What are the three primary weaknesses of the payback method? (6 points) Money.
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