Which project do you accept on the basis of npv

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Reference no: EM131328635

You have a $10 million capital budget and must make the decision about which investments your firm should accept for the coming year. Use the following information on three mutually exclusive projects to determine which investment your firm should accept. The firm's cost of capital is 12 percent.

Cash Flows	Project 1	Project 2	Project 3
Initial Cash outflow	-$ 4,000,000	-$ 5,000,000	-$ 10,000,000
Year 1 Cash inflow	1,000,000	2,000,000	4,000,000
Year 2 Cash inflow	2,000,000	3,000,000	6,000,000
Year 3 Cash inflow	3,000,000	3,000,000	5,000,000

a. Which project do you accept on the basis of NPV?

b. Which project do you accept on the basis of PI?

c. If these are the only investments available, which one do you select?

Reference no: EM131328635

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