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You are asked to evaluate two projects.Project A requires an initial investment of €10000 and pays back in years 1 to 4 the following amounts €1000, €2500, €4750, €6500. The equipment requires an upgrade in year 2 costing €1500. Project B requires an initial investment of €9000 and pays back in years 1 to 4 €6000, €3000, €1000, €1000. A maintenance charge in year 3 will cost €500.

Using a discount rate of 5% calculate the NPV for each project.

What is the IRR for each project?

What is the Payback period for each project?

Which project would you recommend? Give your reasons.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92812329

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