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Unformatted text preview: Input area: Annual cash flows: A B Year 0 Year 1 Year 2 Year 3 Year 4 Required return Output area: a. Payback (A) 0.00 Payback (B) 0.00 Payback criterion implies accept Project B because it pays back sooner. b. NPV (A) $ NPV (B) $ NPV criterion implies accept Project B because it has a higher NPV. c. IRR (A) Err:523 IRR (B) Err:523 IRR decision rule implies accept Err:523 because its IRR is greater. d. PI (A) #DIV/0! PI (B) #DIV/0! Profitability index criterion implies accept #DIV/0! because its PI is larger. e. The only decision rule that can rank mutually exclusive projects is NPV, therefore you should accept Project B...
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This note was uploaded on 09/09/2011 for the course BUSINESS 300 taught by Professor N/a during the Spring '09 term at DeVry Chicago.
 Spring '09
 N/A
 Finance

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