principles finance managerial

Project Description:

5) fi is in the process of choosing the better of the two equal-risk, mutually exclusive capital expenditure projects- a and b. the relevant cash flows for each project are shown in the following table. the firm’s cost of capital is 14%. calculate each project payback period and the net present value. indicate which project would you recommend.

project a project b
initial investment(cf0) $27,000 $25,500

year(t) cash inflows (cft)
1 $9,500 $10,000
2 $9,500 $9,000
3 $9,500 $8,000
4 $9,500 $7,000
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