Consider the following two mutually-exclusive projects and their cash flows: Project A Project B...
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Accounting
Consider the following two mutually-exclusive projects and their cash flows:
Project A Project B
Year 0 -5000 -20000
Year 1 3000 7000
Year 2 2000 7000
Year 3 2000 7000
Year 4 2000 7000
Year 5 1000 7000
The investor compares the two projects using three different rules:
Rule I - NPV rule
Rule II - IRR rule
Rule III - Payback rule with a payback period <= 2 years
Assuming that the cost of capital for both projects is 10%, the investor should pick Project A over Project B following:
Rule I only
Rule II only
Rule III only
Rules I and II
Rules I and III
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