Question: Joy Products has two projects, which are mutually exclusive. The cash flows will be: Year Cash flow (A) Cash flow (B) 0 $80,000

Joy Products has two projects, which are mutually exclusive. The cash flows will be:

Year                                 Cash flow (A)                               Cash flow (B)

0                                       ‒ $80,000                                      ‒ $80,000

1                                       $60,000                                         $10,000

2                                       $30,000                                         $15,000

3                                       $20,000                                         $22,000

4                                       $10,000                                         $40,000

5                                       $5,000                                           $60,000

(a) If the discount rate is 8%, which project should be adopted?

(b) If the discount rate is 15%, which project should be adopted?


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