Company accept based on discounted pay back method

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Harper Mining Ltd is considering to invest in one of the two following equipment. Each equipment will last 5 years and have no salvage value at the end. The company's required rate of return for all investment projects is 7%. The cash flows of the projects are provided below.

Required:

a) Identify which option of equipment should the company accept based on net present value (NPV) method.

b) Identify which option of equipment should the company accept based on discounted pay back method.

Give a proper explanation with the formulas.

Reference no: EM132575073

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