M/s Sons & Sons is considering two projects, A & B, with cash flows as shown below: periodCash Flow ofProject AProject B0-90,000-150,000130,00072,000230,00035,000330,00040,000430,00025,000 Calculate discounted payback period, net present value and internal rate of return for each project using opportunity cost of capital 13 % & 9% for project A & B respectively.Which project(s) should be accepted if : c. Why the cost of capital for A might be higher than for B. State possible reason(s

Year Cash Flows Present Value Factors @13% Present Value of cash flows ($) PVF @12% Present Value…

Answered: M/s Sons & Sons is considering two…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 7P

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M/s Sons & Sons is considering two projects, A & B, with cash flows as shown below:

period	Cash Flow of
Project A	Project B
0	-90,000	-150,000
1	30,000	72,000
2	30,000	35,000
3	30,000	40,000
4	30,000	25,000

Calculate discounted payback period, net present value and internal rate of return for each project using opportunity cost of capital 13 % & 9% for project A & B respectively.
Which project(s) should be accepted if :

c. Why the cost of capital for A might be higher than for B. State possible reason(s

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