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Calculate the npv and the profitability index

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Reference no: EM132465459

XYZ Construction is considering two projects to develop. The expected cash inflows are as follows :

                                           Project M      Project N

           Year 1                        10,000            25,000

           Year 2                        15,000            25,000

           Year 3                        20,000            25,000

           Year 4                        25,000            25,000

           Year 5                        30,000            25,000

Each Project requires an investment of $100,000. A rate of 10% has been selected for the

NPV Analysis.

Required:

a) Calculate the NPV and the Profitability Index and suggest which project should be recommended based on each method.

b) Explain what are the key decisions a Finance Manager has to take in an Organization with suitable examples.

Reference no: EM132465459

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