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Determining the required rate of return

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Reference no: EM132548172

Farrah Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%.

Project 1
Project 2
Initial investment
$185,000
$1,100,000
Cash inflow Year 1
$230,000
$1,450,000

Compute the following for each project:

· NPV (net present value)
· PI (profitability index)
· IRR (internal rate of return)

Which project should be selected? Why?

Reference no: EM132548172

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