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Answered Same Day Jun 12, 2020

Solution

Aarti J answered on Jun 13 2020
141 Votes
Answer 1
    a    year    Cash flows    PVIF @ 8%    Present value
        0    -100000    1    -100000
        1    25000    0.9259259259    23148.1481481481
        2    25000    0.8573388203    21433.4705075446
        3    25000    0.793832241    19845.8060255042
        4    25000    0.7350298528    18375.7463199113
        5    25000    0.680583197    17014.5799258438
        Net Present value =
        Present value of cash flows    99817.7509269521
        Less: Initial investment    -100000
        NPV    -182.2490730479
        Payback period =
        Initial investment    100000
        Divide: Cash flows    25000
        Payback period =    4
        Profitability index =
        Present value of cash flows    99817.7509269521
        Less: Initial investment    100000
        Profitability index =    1.00
        Accounting return =
        Average net income    2710
        Divide: Average book value    13550
        ARR =    20.00%
    b    The project should not be accepted as the NPV is negative and the payback period is more than the company's policy.
Answer 2
        Project    Initial investment    IRR    PV of...
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