QUESTION 2The information below is for a firm that seeks to invest in any of the two projectsnamely Project L and S with an initial investment of K100,000Here are the projects' net cash flows (in thousands of kwachas):Year012380,00020,000ProjectLProject SDepreciation, salvage values, net working capital requirements, and tax effectsare all included in these cash flows. The Chief Financial Officer (CFO) also madesubjective risk assessments of each project, and he concluded that both projectshave risk characteristics that are similar to the firm's average project. The cost ofcapital is 10%. You must determine whether one or both of the projects should beaccepted.(a)(b)-100,00010,000-100,000 70,000(c)60,00050,000What is capital budgeting?Calculate the project's NPV for project L and S. State which project shouldbe selected if the projects are:i independentii) ExclusiveCalculate the payback period for project L and S. State which projectshould be selected if the projects are:i independentii) Exclusive

Answered: The information below is for a firm…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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