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

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Your 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 Year 2 Year 3 Year 4 Year 5 105 850 153 250 225 650 245 000 250 350 117 050 162 400 275 500 255 000 260 000 Required: a. Identify which project should your company accept based on Net Present Value method? (4 marks) b. Identify which project should your company accept based on Discounted Payback Period method if the payback criterion is maximum 2.5 years? (3 marks)

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