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Cash Flow Year Project a Project b...




Cash Flow Year Project a Project b 0 $-8,000 $-20,000 1 11,000 25,000 Project a entails the evaluation of customer billing system proposed . Under this system all the bookkeeping and billing presently company done would be done by outside company z which would do a credit analysis of delinquent customers. Project b is offered by compeditor of company z would kee track of inventory and reorder parts and materials as needed. This would reduce stock outs. What are the NPV, PI, and IRR for projects a and b?Which should be chosen? Would answer be changed if considered under capital constraints? What return on $12,000 (for not employing employees of a)is necessary to make one indifferent to choosing one project over the other under a capital-rationing situation?


Paper#8531 | Written in 18-Jul-2015

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