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You are considering two mutually exclusive projects that have the following characteristics: Project A: Initial Investment of $100

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You are considering two mutually exclusive projects that have the following characteristics:

Project A: Initial Investment of $100. Cash flow of 0 at year 1 and $144 at year 2.

Project B: Initial Investment of $50. Cash flow of $65 at year 1 and 0 at year 2.

Assume that the required rate of return is 15%. Please offer your recommendations for the best project choice.

1. What is NPV of project A? Round to two digits after decimal.  Round to two digits after decimal.

2. What is NPV of project B?  Round to two digits after decimal

3. Which project should we select based on NPV rule? Type, A , B, or None. 

4. What is IRR of project A?  Round to nearest % point.

5. What is IRR of project B?  Round to nearest % point.

6. Which project should we select based on IRR analysis? Type, A , B, or None. 

7. What is PI (profitability index) for project A? 

8. What is PI (profitability index) for project B? 

9. Which project should we select based on PI rule? Type, A , B, or None.  Round to two digits after decimal.

10. To take care of the potential scale problem, calculate PI of the incremental cash flows.  Round to two digits after decimal.

11. Based on PI of the incremental cash flows, which project is better. Type, A or B.