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In: Finance

Your firm is subject to capital rationing and can only invest $60,000. You've estimated the following...

Your firm is subject to capital rationing and can only invest $60,000. You've estimated the following cash flows (in $) for two projects: just need answers don't need formula and steps

Year Project A Project B
0 -55,000 -55,000
1 10,000 30,000
2 20,000 20,000
3 30,000 10,000
4 40,000 0

The required return for both projects is 8%.

A:What is the payback period for project A? 2 Decimals

B:What is the payback period for project B? 2 decimals

C:Which project seems better according to the payback method?

Project B

Project A

D:What is the NPV for project A?

G:What is the NPV for project B?

E:Which project seems better according to the NPV method?

Project A

Project B

F:Compare the answers to parts 3 and 6. If both projects are mutually exclusive, which one should you accept?

Project B

Project A

Solutions

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