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Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects for A-Z Motorcars....

  1. Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects for A-Z Motorcars. Assume the discount rate for both projects is 10 percent.

YEAR AZM MINI-SUV AZF FULL-SUV
0 −$650,000 −$975,000
1 370,000 490,000
2 310,000 460,000
3 260,000 410,000

  1. page 225Based on the payback period, which project should be taken?

  2. Based on the NPV, which project should be taken?

  3. Based on the IRR, which project should be taken?

  4. Based on the above analysis, is incremental IRR analysis necessary? If yes, please conduct the analysis.

Solutions

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 3 hours ago
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