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Question: our company is considering to choose one of the two...

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our company is considering to choose one of the two projects: Project Gold and Project Diamond. Each project will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 9%. The cash flows of two projects are provided below.

                                                            Gold                        Diamond

Cost                                             $485 000                       $520 000

Future Cash Flows                         

Year 1                                             105 850                        117 050

Year 2                                             153 250                        162 400

Year 3                                              225 650                        275 500

Year 4                                               245 000                       255 000

Year 5                                              250 350                       260 000

 a. Identify which project should your company accept based on Net Present Value method? 

b. Identify which project should your company accept based on Discounted Payback Period method if the payback criterion is maximum 2.5 years? 

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