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There are two projects. One has an outflow of cash of $40,000 in years 0 and 1, followed by an inflow of $55,000 in each of the years 2 and 3. The other has a cash outflow of $80,000 in year 0, followed by an inflow of $34,000 in years 1, 2, and 3.

If the profitability index decision rule applies and the required return is 8%, which project should be selected?

If the NPV decision rule applies then which project should be selected?

Please show all your calculations used to derive the answers.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92747395

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