Question: Consider two projects. Project 1 costs $262,000 and returns $60,000 per year for 8 years. Project 2 costs $390,000 and returns $70,000 per year. Project

Consider two projects. Project 1 costs $262,000 and returns $60,000 per year for 8 years. Project 2 costs $390,000 and returns $70,000 per year. Project 2 is determined to be less risky, so your company only requires an 8 percent minimum annual return compared to 10 percent for project 1. What is the NPV of each project? What is the absolute maximum that the company should consider investing in each project?

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To calculate the NPV of each project you will need to use the following formula NPV CF 1 rt I where ... View full answer

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