Compute project net cash flows

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Your organization plans to buy equipment worth P500,000 with an additional working capital of P50,000. The asset yields an even cash flow of P130,000 each year with a salvage value of P75,000 at the end of five years. Another investment opportunity is a storage facility which costs P450,000 with a cash inflow of P250,000 for the first year, P200,000 for the second year and P150,000 for the third year.

Problem 1: If the corporate tax rate is 25% and the project's cost of capital is 10%, compare the two investment opportunities on which is more desirable by computing for the following:

a) Project Net Cash Flows
b) Net Present Value
c) Payback Period
d) Profitability Index
e) Internal Rate of Return

Reference no: EM132979485

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