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You are evaluating two mutually exclusive projects. Project 1 has an NPV of $3000 and an IRR of 15%. Project 2 has expected c

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Answer #1

The cash flows of project 2 are:

Year 0:-22477
Year 1:14236
Year 2:11904
Year 3: 10013

Net present value=-Initial cash outflow + Present value of future cash flows
=-22477+14236/(1+10%)^1+11904/(1+10%)^2+10013/(1+10%)^3
=-22477+12941.81818+9838.016529+7522.915101
=7825.74981

Mutually exclusive projects refers to a set of projects out of which only one project can be seleted.
As the NPV of project 2 is higher than project 1, project 2 should be selected

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