Calculate project payback period

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Zara Industries is in the process of choosing the better of two equal-risk, mutually exclusive capital expenditure projects-A and B. The relevant cash flows for each project are shown in the following table. The firm's cost of capital is 14%.

Investment A Investment B

Initial

Investment Tk. 375000 Tk. 270000

Year Cash Inflows

1 Tk. 100,000 Tk. 100,000

2 100,000 90,000

3 100,000 80,000

4 100,000 70,000

5 100,000 60,000

(i) Calculate each project's payback period.

(ii) Calculate the net present value (NPV) for each project.

(iii) Calculate the internal rate of return (IRR) for each project.

Reference no: EM132577422

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