Question: Two projects, Project Q and Project R, are being analyzed. Both require an initial outlay of $28,000. Year Project Q Project R 1 $8,000 $7,000
Two projects, Project Q and Project R, are being analyzed. Both require an initial outlay of $28,000.
Year | Project Q | Project R |
1 | $8,000 | $7,000 |
2 | $7,000 | $8,000 |
3 | $6,000 | $9,000 |
4 | $5,000 | $6,000 |
5 | $4,000 | $3,000 |
Requirements:
- Calculate the NPV for each project using a discount rate of 13%.
- Determine the profitability index (PI) for each project.
- Calculate the IRR for each project.
- State which project should be accepted based on the IRR.
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