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Caledonia is considering two additional mutually exclusive projects (and the following questions are only related to the Projects A and B described

Caledonia is considering two additional mutually exclusive projects (and the following questions are only related to the Projects A and B described below; these are completely independent of the Project analyzed in the first 10 questions!). The cash flows associated with these projects are as follows:





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






The required rate of return on these projects is 11 percent.



What is each project’s payback period? Dawn

What is each project’s net present value? Dawn

What is each project’s internal rate of return? Dawn

What has caused the ranking conflict? Dawn

Which project should be accepted? Why? Lorie



** Discuss the factors you would have to consider if Caladonia was doing a lease versus buy for the two projects described in question 12

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