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Compare given three alternative investments

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Question: You have been asked to compare three alternative investments and make a recommendation.

• Project A has an initial investment of $5 million and after-tax cashflows of $ 2.5 million a year for the next 5 years.

• Project B has no initial investment, after-tax cash flows of $ 1 million a year for the next 10 years, and a salvage value of $2 million (from working capital).

• Project C has an initial investment of $10 million, another investment of $5 million in 10 years, and after-tax cashflows of $ 2.5 million a year forever. The discount rate is 10% for all three projects. Which of the three projects would you pick? Why?

Reference no: EM131683172

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