Question: Question 4 Project A and Project B have the following cash flows: Year Project A Project B 0 -100000 -160000 1 30000 40000 2 35000

Question 4

Project A and Project B have the following cash flows:

Year

Project A

Project B

0

-100000

-160000

1

30000

40000

2

35000

45000

3

40000

50000

4

45000

55000

5

50000

60000

6

55000

65000

Requirements:

  1. Calculate the NPV of both projects assuming a required rate of return of 7%.
  2. Determine the IRR for each project.
  3. Calculate the payback period for both projects.
  4. Evaluate and state which project(s) should be selected if they are independent.
  5. Determine which project should be selected if they are mutually exclusive and explain why.

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