DEF Inc. is planning two long-term investments:Investment A:•Initial Outlay: $10,000,000•Annual Returns: $2,000,000 for 10 yearsInvestment...
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DEF Inc. is planning two long-term investments:
Investment A:
•Initial Outlay: $10,000,000
•Annual Returns: $2,000,000 for 10 years
Investment B:
•Initial Outlay: $8,000,000
•Annual Returns: $1,800,000 for 10 years
Requirements:
1.Compute the NPV for both investments at a 7% discount rate.
2.Calculate the IRR for each investment.
3.Assess the profitability index (PI) for both investments.
4.Recommend the more attractive investment based on NPV, IRR, and PI.
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