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Payback and net present value

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Please help with the given economics problem:

X-treme vitamin company is considering two investments, both of whch cost $ 10,0000. The cash flows re as follows. Which of the two project shouldb chosen based on the payback method? Which of the two prjectsshould be chose baded on teh net presnt vue method? Should afirm normally havemore confidence in answer a or answer b?

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Solution Summary

This solution includes an Excel file containing calculations of pack back period and net present value (NPV) of two projects.

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** Please see the attached file for the complete solution response **
Hi,

X -treme Vitamin Company
Year Project A Project B
0 -10000 -10000
1 12000 10000
2 8000 6000
3 6000 16000
Cost of capital 10%
a. Which of the two projects should be chosen based on the payback method?

Year Project A Cumulative cash inflows (Project A) Project B Cumulative cash inflows (Project ...

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