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Each of two mutually exclusive projects involves an investment of $ 108,000.   The cash flows for...

Each of two mutually exclusive projects involves an investment of $ 108,000.  

The cash flows for the projects are as follows:

                                         Year              Project “A”                  Project "B"

                                            1                    $30,000                            $36,000

                                            2                      30,000                              36,000

                                            3                      30,000                              36,000

                                           4                      30,000                               36,000

                    A.   Calculate each project's payback period.   

                    B.   Compute the IRR of each project.   

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Answer #1

1 Project A 3 Year Cash Flow Cumulative Cash flow 0-108000 1 30000 2 30000 3 30000 4 30000 108000 78000 -18000 10 Payback period 11 IRR 12 13 Project A 14 15 Year 16 17 18 19 20 21 22 Payback period 23 IRR 3.60 years 4.35% Cash Flow Cumulative Cash flow 0-108000 1 36000 2 36000 3 36000 4 36000 108000 36000 0 36000 3.00 years 12.59%

answered by: ANURANJAN SARSAM
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