JKL Ltd. has two potential projects, each requiring an initial outlay of ?50,000 and a...
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Accounting
JKL Ltd. has two potential projects, each requiring an initial outlay of ?50,000 and a life of 4 years. The required rate of return is 11%, and the tax rate is 25%. The projects will be depreciated using the straight-line method. The net cash flows (before taxes) expected are given below along with the PV factor (at 11%):
Year
1
2
3
4
Project 1
20,000
18,000
16,000
14,000
Project 2
15,000
17,000
19,000
20,000
PV factor
0.901
0.812
0.731
0.659
You are required to:
Calculate the NPV of both projects.
Recommend which project to proceed with.
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