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Payback and net present value based problem

Problem: Company considers two investments both cost 10,000. The cash flows are as follows:

Year A Year B
12,000 10,000
8,000 6,000
6,000 16,000.

A. Which of the two projects should be chosen based on the payback method?

B. Which of the two projects should be chosen based on the net present value method?

C. Should the firm normally have more confidence in answer a or b?

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Finance Basics: Payback and net present value based problem

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