Question: The State Spartan Corporation is considering two mutually exclusive projects. The required rate of return on these projects is 9 percent. PROJECT A PROJECT B

The State Spartan Corporation is considering two mutually exclusive projects. The required rate of return on these projects is 9 percent.

PROJECT A

PROJECT B

Initial outlay

$30,000

$30,000

Inflow year 1

11,625

0

Inflow year 2

11,625

0

Inflow year 3

11,625

0

Inflow year 4

11,625

0

Inflow year 5

11,625

80,000

a. What is each project's payback period?

b. What is each project's NPV?

c. What is each project's IRR?

d. What has caused the ranking conflict?

e. Which project should be accepted? Why?

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