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Calculate npv of each project using a discount rate

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Reference no: EM132603226

Question a: A firm has a capital budget of $100 which must be spent on one of two projects, each requiring a present outlay of $100. Project A yields a return of $120 after one year, whereas Project B yields $201.14 after 5 years. Calculate:

(i) The NPV of each project using a discount rate of 10%;

(ii) The IRR of each project.

Question b: What are the project rankings on the basis of these two investment decision rules? Suppose that you are told that the firm's reinvestment rate is 12%, which project should the firm choose?

Reference no: EM132603226

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