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Project Evaluation (in $):Project X:Initial Cost: $40,000Year 1: $10,000Year 2: $15,000Year 3: $20,000Project Y:Initial Cost:...

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Accounting

Project Evaluation (in $):
  • Project X:
    • Initial Cost: $40,000
    • Year 1: $10,000
    • Year 2: $15,000
    • Year 3: $20,000
  • Project Y:
    • Initial Cost: $30,000
    • Year 1: $5,000
    • Year 2: $10,000
    • Year 3: $25,000

Required:

  1. Compute the payback period for each project.
  2. If the standard payback period is 2 years, which project will you select?
  3. Calculate the discounted payback period at a cost of capital of 10%.
  4. Compute the NPV for each project using a discount rate of 10%.
  5. Determine the profitability index (PI) for both projects.

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