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ABC Corporation wants to determine which of the following project to invest

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ABC Corporation wants to determine which of the following project to invest.

 

Time 0

Time 1

Time 2

Time 3

Time 4

Time 5

Project A

-$100,000.00

$20,000.00

$30,000.00

$42,000.00

$30,000.00

$40,000.00

Project B

-$150,000.00

$23,000.00

$32,000.00

$45,000.00

$60,000.00

$60,000.00

Which of following statement is correct?

 

a.

Project A has the same payback period as project B. Hence these two projects are the same to us.

 

b.

Based on a NPV calculation with 3.6% interest rate, project A is better than project B.

 

c.

Based on an IRR calculation, project A is better than project B.

 

d.

IRR is not reliable for these two projects, we should make our decision based on NPV.