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Breakeven cash inflows and risk

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Pueblo Enterprises is considering investing in either of two mutually exclusive projects, X and Y. Project X requires an initial investment of $30,000; project Y requires $40,000. Each project's cash inflows are 5-year annuities: Project X's inflows are $10,000 per year; project Y's are $15,000. The firm has unlimited funds and, in the absence of risk differences, accepts the project with the highest NPV. The cost of capital is 15%.

Find the NPV for each project. Are the projects acceptable?

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The solution answers the question below and goes into quite a bit of detail regarding Break Even Analysis. The answer is ideal for students looking for a detailed analysis of the question asked below. An excellent response to the question being asked.

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