Bill Zimmerman is evaluating two new business opportunities. Each of the opportunities shown below has a ten-year
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Bill Zimmerman is evaluating two new business opportunities. Each of the opportunities shown below has a ten-year life. Bill uses a 10% discount rate.
Required
a. Calculate the net present value of the two opportunities.
b. Calculate the profitability index of the two opportunities.
c. Which option should Bill choose? Why?
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
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