MNO Ltd. is deciding between two projects that require ?15,000 each and have a 5-year...
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Accounting
MNO Ltd. is deciding between two projects that require ?15,000 each and have a 5-year life. The company's required rate of return is 13%, and it pays a tax rate of 35%. Both projects will be depreciated on a straight-line basis. The net cash flows (pre-tax) and the PV factor (at 13%) are as follows:
Year
1
2
3
4
5
Project 1
6,000
7,000
7,500
8,000
8,500
Project 2
9,000
6,000
7,000
6,500
5,000
PV factor
0.885
0.783
0.693
0.613
0.543
You are required to:
Determine the NPV for each project.
Decide which project to invest in.
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