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Solve the profitability index for each project

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Suppose you are analyzing two proposed projects that have Br. 1,062,500 (Project A) and Br. 637,500 (Project B) initial investments with the following expected cash flows:

Year            Project A               Project B

1               Br. 340,000          Br. 212,500

2               425,000                 212,500

3                637,500                  425,000

Required:

Question (a) Calculate the net present values (NPVs) for each project, assuming the firm's WACC is 10% (show with steps).

Question (b) Calculate the Profitability Index for each project (show with steps).

Question (c) Which project(s) should be adopted if the projects are independent each other? (Show with steps).

Question (d) Which project should be adopted if the projects are mutually exclusive ones?

Reference no: EM132621485

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