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# hw1 proj - Net flows-\$300,000-\$50,000 \$150,000 \$200,000...

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Exercises 2-4 Project: Omega Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total Required rate of return 21% Outflows -\$225,000 -\$190,000 \$0 -\$30,000 \$0 -\$30,000 \$0 -\$30,000 -\$505,000 Inflows \$0 \$0 \$150,000 \$220,000 \$215,000 \$205,000 \$197,000 \$100,000 \$1,087,000 Net flows -\$225,000 -\$190,000 \$150,000 \$190,000 \$215,000 \$175,000 \$197,000 \$70,000 \$582,000 NPV \$76,650 Project: Alpha Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total Required rate of return 21% Outflows -\$300,000 -\$100,000 \$0 -\$50,000 \$0 -\$50,000 \$0 -\$30,000 -\$530,000 Inflows \$0 \$50,000 \$150,000 \$250,000 \$250,000 \$200,000 \$180,000 \$120,000 \$1,200,000
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Unformatted text preview: Net flows-\$300,000-\$50,000 \$150,000 \$200,000 \$250,000 \$150,000 \$180,000 \$90,000 \$670,000 NPV \$129,536 Assume that the decision is based only on financial information and have to choose only one project. When compare NPV of project Omega and Alpha, we can clearly see that NPV of project Alpha is more than project Omega. So, it means both of the projects meet the minimum desired rate of return but, the higher positive NPV's are desirable. Then, I will choose Alpha project...
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