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The directors of Yama Yama Investments Limited are considering two mutually exclusive projects

Accounting

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The directors of Yama Yama Investments Limited are considering two mutually exclusive projects. Both projects are concerned with the purchase of land for building. See details below. Period Project A Project B Initial outlay 0 100 000 60 000 Cash inflows 60 000 36 000 N 30 000 16 000 3 40 000 28 000 Required: 1. What is capital budgeting? (2) 2. When looking at capital budgeting, do we take the accrual system into account. Give a reason for your answer. (1) 3. Calculate the net present value of each of the projects above and state which of two projects should the directors accept and why. Assume a cost of capital/ required rate of return to be 10% (12)