Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Consider the following two mutually exclusive projects:
(a) At an interest rate of 25%, which project would you recommend choosing?
(b) Compute the area of negative project balance, discounted payback period, and area of positive project balance for each project. Which project is
exposed to a higher risk of loss if either project terminates at the end of
year 2?

Transcribed Image Text:Net Cash Flow
End of Year
Project A Projed B
-$1,000
-$1,000
1
$912
$284
2
$684
$568
3
$456
$852
4
$228
$1,136
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