Skiba company is thinking about two different modifications, Ask an Expert

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Skiba Company is thinking about two different modifications to its current manufacturing process. The after-tax cash flows associated with the two investments follow:

Year	Project I	Project II
0	$(100,000)	$(100,000)
1	-	63,857
2	134,560	63,857
Skiba's cost of capital is 10%.

Required:

1. Compute the NPV and the IRR for each investment.

2. CONCEPTUAL CONNECTION Explain why the project with the larger NPV is the correct choice for Skiba.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91738328

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