Question: The Sanders Electric Company is evaluating two projects for possible inclusion in the firms capital budget. Project M will require a $37,000 investment while project

The Sanders Electric Company is evaluating two projects for possible inclusion in the firm€™s capital budget. Project M will require a $37,000 investment while project O€™s investment will be $46,000. After-tax cash inflows are estimated as follows for the two projects:

a. Determine the payback period for each project.
b. Calculate the net present value and profitability index for each project based on a 10
c. Determine the internal rate of return and modified internal rate of return for Projects M and O.

Year Project M $12,000 12,000 12,000 12,000 Project o $10,000 10,000 15,000 15,000 15,000

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a Payback M 3700012000 308 years Payback O 3 years 1100015000 373 years b NPV M 12000 PVIFA 10 4 370... View full answer

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