Question: A choice has to be made between two investment proposals. Proposal A requires an immediate outlay of $60 000 and a further outlay of $40

A choice has to be made between two investment proposals. Proposal A requires an immediate outlay of $60 000 and a further outlay of $40 000 after 3 years. Net returns are $20 000 per year for 10 years. The investment has no residual value after 10 years. Proposal B requires outlays of $29 000 in each of the first 4 years. Net returns starting in Year 4 are $40 000 per year. The residual value of the investment after 10 years is $50 000. Which proposal is preferable at 20%?

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Proposal A PV IN 20 000 1 12 10 02 83 849 PV OUT Immediate outlay 60 000 After 3 years 40 000l2 3 23 ... View full answer

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