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622 HW 4 MC Simulation-190212 (1) -Compatibility Mode Mailings Review View Help Tell me what you want to do 1 Normal Heading
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Answer #1

(a)

1 Discount Rate (in %) 7 Time Project A PV Factor@ 7% | PV of Cash Flow Project B PV Factor@ 7% | PV of Cash Flow -90000 1700

1 Discount Rate (in %) 7 Project A PV Factor@7% | PV of Cash Flow (B3 *C3) (B4 C4) (B5 C5) (B6 C6) (B7*C7) Project B PV of Ca16 IRR Project A (in %) 13.62 Project B (in %) 8.36 Project A PV Factor@ 7% | PV of Cash Flow Project B PV Factor@ 7% | PV of16 IRR Project A (in %) 13.62 17 18 0 19 (A18+1) 20 (A19+1) 21 FA20+1) 22 (A21+1) 23 (A22+1) 24 A23+1) 25 A24+1) 26 (A25+1) 2

(b) If projects A and B are independent, then both projects should be undertaken as both possess positive NPVs and hence add value to the firm undertaking the projects.

(c) If projects A and B are mutually exclusive, then the one with greater positive NPV should be undertaken as the same would add greater value to the firm undertaking the project.

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