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Payback: Refer to Problem 10.5. What are...
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Payback: Refer to Problem 10.5. What are the payback periods for production systems 1 and 2? If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should the firm invest?

10.5: Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for their production systems, in which system should the firm invest?
Year System 1 System 2
0 −$15,000 −$45,000
1 15,000 32,000
2 15,000 32,000
3 15,000 32,000
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Finance-8299953.xls

Net present value: Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the...

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