Company ABC is evaluating two projects:Project AlphaInitial investment: $2,500,000Year 1: $900,000Year 2: $1,200,000Year 3: $1,100,000Year...
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Accounting
Company ABC is evaluating two projects:
- Project Alpha
- Initial investment: $2,500,000
- Year 1: $900,000
- Year 2: $1,200,000
- Year 3: $1,100,000
- Year 4: $700,000
- Project Beta
- Initial investment: $2,800,000
- Year 1: $1,000,000
- Year 2: $1,100,000
- Year 3: $1,400,000
- Year 4: $900,000
a. Calculate the payback period for each project. b. Determine the NPV of each project at a discount rate of 8%. c. Evaluate the profitability index for both projects. d. Recommend which project should be pursued based on your calculations.
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