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Cullumber Industries is expanding its product line and its production capacity. The costs and expected cash...

Cullumber Industries is expanding its product line and its production capacity. The costs and expected cash flows of the two independent projects are given in the following table. The firm uses a discount rate of 14.98 percent for such projects.

Year Product Line Expansion Production Capacity Expansion
0 -$2,426,500 -$6,756,300
1 501,800 2,381,500
2 853,000 2,381,500
3 853,000 2,381,500
4 853,000 3,975,200
5 853,000 3,975,200


a. What are the NPVs of the two projects?

b. Should both projects be accepted? or either? or neither? Explain your reasoning.

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