Firm has two projects under consideration

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A firm has two projects under consideration, and it can only select one. The first has an initial outlay of $55 million and a six-year life. After-tax net cash flows are -$8 million in year 1, $12 million in year 2, and $24 million in each of the remaining four years. The second project has a nine year life and an initial outlay of $63 million. After-tax net cash flow in year 1 is -$5 million, and after that it is $18 million per year. The cost of capital is 11.0%. Which, if either, project should be taken?

Reference no: EM131934073

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