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Your firm is considering the following two investment proposals. A and B. Year 0 1 2 3 4 5 Cash Flows B $20,000 -$20,000 5,000
Your firm is considering the following two investment proposals. A and B. Year 0 1 2 3 4 5 Cash Flows B $20,000 -$20,000 5,000 24,000 5,000 0 5,000 0 5,000 0 5,000 Your firm's cost of capital is 10 percent. Assume cash flows occur at the end of each year. Compute the NPV, IRR, and profitability index for each investment. Should the firm select either investment? Note that these two projects are not mutually exclusive; therefore, evaluate each project independently of the other
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