Question: Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows: The required rate of return on these

Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows:

The required rate of return on these projects is 11 percent.
a. What is each project€™s payback period?
b. What is each project€™s net present value?
c. What is each project€™s internal rate of return?
d. What has caused the ranking conflict?
e. Which project should be accepted? Why?
f. Describe the factors that Caladonia would have to consider if they were doing a lease versus buy for the two projects.

YEAR PROJECTA PROJECT B S100,000 S100,000 32,000 32,000 32,000 32,000 32,000 S200,000

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Project A a Payback period is defined as the expected number of years required to recover the original investment Period 0 1 2 3 4 5 Net cash flow 100000 32000 32000 32000 32000 32000 Cumulative NCF 1... View full answer

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