Question: Questions 2 (20 marks) Two mutually exclusive projects, C and D, will have an initial cost of $20,000 each and are expected to yield the
Questions 2 (20 marks)
- Two mutually exclusive projects, C and D, will have an initial cost of $20,000 each and are expected to yield the following aftertax cash flows.
| Year | C | D |
| 1 | $4,000 | $8000 |
| 2 | $6,000 | $6,000 |
| 3 | $5,000 | $6,000 |
| 4 | $4,000 | $1,000 |
| 5 | $6,000 | $3,000 |
| 6 | $2,000 | $4,000 |
| 7 | $2,000 |
|
| 8 | $2,000 |
|
- Based on the payback technique, if the maximum acceptable Payback Periodis 4 years, would you accept Project C, Project D, neither or both (6 marks)
- Based on the NPV technique, if the required rate of return is 12%, would you accept Project C, Project D, neither or both? (7 marks)
- Based on the EAA technique, if the required rate of return is 12%, would you accept Project C, Project D, neither or both? (7 marks)
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