2- The Arab Levant Company has three projects. The allocations available to the company based...
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2- The Arab Levant Company has three projects. The allocations available to the company based on the capital budget will allow the company to choose one of the three projects. The following table shows the cash flows of the three projects and the cost of each project present in year 0. Based on the interest rate (cost of capital) mentioned at the bottom of the table and future cash flows. Answer the following questions: A. What is the project that the company should accept based on the NPV? Why. B. What is the project that the company must accept based on the payback period, assuming that the two projects are independent? Why? C. Assume that the rate of return was 8.7%. Which of these projects will you accept? Why? Year 0 1 The project C Cash flow -$160,000 $35,000 $35,000 $35,000 $35,000 $35,000 The project B Cash flow $160,000 $50,000 $41,000 $42,000 $43,000 $44,000 The project A Cash flow -$210,000 $50,000 $52,000 $43,000 $39,000 $49,000 2 3 4 5 The cost of capital 5.70% 11.00% 7%
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