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Interstate Appliance Inc. is considering the following two mutually exclusive projects. Projected cash flows for these...

Interstate Appliance Inc. is considering the following two mutually exclusive projects. Projected cash flows for these ventures are as follows:

Plan A
IO CF1 CF2 CF3 CF4 CF5
3,600,000 0 0 0 0 7,000,000
Plan B
IO CF1 CF2 CF3 CF4 CF5
3,500,000 1,000,000 0 2,000,000 2,000,000 1,000,000

If Interstate Appliance has a 12% cost of capital, what decision should be made regarding the projects above?

a. Accept plan A.

b. Accept plan B.

c. Reject both plans A and B.

d. A and B are indifferent.

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Expert Solution

jeff jeffy answered 1 year ago
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