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Problem Two You are considering two mutually exclusive projects with the following cash flows:

Project C/F0 C/F1 C/F2 C/F3 C/F4 C/F5 C/F6

A $(41,215) $12,500 $14,000 $16,500 $18,000 $20,000 N/A

B $(46,775) $15,000 $15,000 $15,000 $15,000 $15,000 $15,000

A) Assuming that the discount rate for project A is 16% and the discount rate for B is 15%, then given that these are mutually exclusive projects, which project would you take and why?

B) If you are one of the management teams, when making a capital budgeting decision, how would you explain why the WACC is different for project A than for project B?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93059599

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