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Which project should be selected on the basis of npv

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Consider the following two mutually exclusive investment projects, which have unequal service lives. X requires an initial investment of $1 million and has a benefit of $400,000 for 3 years when it needs to be replaced. It has a salvage value of $300,000 at the end of its life. Y requires an initial investment of $1.5 million and has a benefit of $250,000 for 6 years when it needs to be replaced. It has no salvage value at the end of its life. Assume that both alternatives will be available in the future with the same investment and expenses.

Problem 1: Given that i = 8%, determine which project should be selected on the basis of Net Present Value.

Reference no: EM132841064

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