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You are considering the following four projects with the given initial investments and cash inflows.Project...

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Accounting

You are considering the following four projects with the given initial investments and cash inflows.

  • Project 1 requires ?5,000 and returns ?1,000, ?2,000, ?3,000, and ?4,000 over the next four years.
  • Project 2 needs ?7,000 and returns ?2,000, ?2,500, ?3,500, and ?4,500.
  • Project 3 requires ?9,000 and returns ?2,500, ?3,000, ?4,000, and ?5,000.
  • Project 4 demands ?11,000 and returns ?3,000, ?3,500, ?4,500, and ?5,500.

Required:

  1. Determine the payback period for each project.
  2. Select the project if the standard payback period is 2.5 years.
  3. Calculate the NPV for each project at a 10% discount rate.
  4. Compute the IRR for each project.
  5. Provide a recommendation based on NPV and IRR criteria.

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