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    Computing The NPV, IRR And Discounted Payback Period

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    ? Two projects being considered are mutually exclusive and have the following projected cash flows:

    Project A Project B

    Year Cash Flow Cash Flow

    0 -$50,000 -$50,000
    1 15,625 0
    2 15,625 0
    3 15,625 0
    4 15,625 0
    5 15,625 99,500
    If the required rate of return on these projects is 10 percent, which would be chosen and why?

    ? Davis Corporation is faced with two independent investment opportunities. The corporation has an investment policy that requires acceptable projects to recover all costs within 3 years. The corporation uses the discounted payback method to assess potential projects and utilizes a discount rate of 10 percent. The cash flows for the two projects are:

    Project A Project B

    Year Cash Flow Cash Flow

    0 -$100,000 -$80,000
    1 40,000 50,000
    2 40,000 20,000
    3 40,000 30,000
    4 30,000 0

    In which investment project(s) should the company invest?

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    https://brainmass.com/business/capital-budgeting/computing-the-npv-irr-and-discounted-payback-period-279849

    Solution Summary

    This solution illustrates how to compute the net present value, internal rate of return and discounted payback period of mutually exclusive projects.

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