Team Week #4 assignment

Team Week #4 assignment - while the IRR criterion...

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YEAR PROJECT A PROJECT B 0 -$100,000 -$100,000 1 $32,000 $0 2 $32,000 $0 3 $32,000 $0 4 $32,000 $0 5 $32,000 $200,000 Required rate of return 11% a. What is each projects payback period? Project A 3.13 Project B 4.5 b. What is each projects's net present value? Project A $18,268.70 Project B $18,690.27 c. What is each project's internal rate of return? Project A 18.03% Project B 14.87% d. What has caused the ranking conflict? The conflicting rankings are caused by the differing reinvestment assumption NPV criteria assumes that cash flows over the life of the project can be reinve
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Unformatted text preview: while the IRR criterion implicitly assumes that the cash flows over the life of t return. e. Which project should be accepted? Why? Project B should be taken because it has the largest NPV. The NPV criterion assumption for the wealth-maximizing firm ns made by the NPV and IRR decision criteria. The ested at the required rate of return or cost of capital, the project can be reinvested at the internal rate of is preferred because it makes the most acceptable...
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Team Week #4 assignment - while the IRR criterion...

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