You are a financial analyst for AIM Inc. You have to recommend one of the two...

 

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You are a financial analyst for AIM Inc. You have to recommend one of the two projects. The expected cash flows (in millions of dollars) for the projects are as follows: Year 0 1 2 3 Project A Project B -150 -150 60 5 60 65 60 115 60 75 The cost of capital for the firm is 14%. A. Compute the payback period, NPV and IRR of the projects. B. Would you accept Project A or B if they are independent? Would you accept project A or B if they are mutually exclusive? Explain why? C. Which project would you recommend and why? D. What is the range of discount rates for which you will accept project A and range of discount rate when you will accept project B? You are a financial analyst for AIM Inc. You have to recommend one of the two projects. The expected cash flows (in millions of dollars) for the projects are as follows: Year 0 1 2 3 Project A Project B -150 -150 60 5 60 65 60 115 60 75 The cost of capital for the firm is 14%. A. Compute the payback period, NPV and IRR of the projects. B. Would you accept Project A or B if they are independent? Would you accept project A or B if they are mutually exclusive? Explain why? C. Which project would you recommend and why? D. What is the range of discount rates for which you will accept project A and range of discount rate when you will accept project B?

Answer rating: 100% (QA)

To analyze and compare Project A and Project B we will calculate the Payback Period Net Present Valu... View the full answer