XYZ Manufacturing Ltd. is considering two mutually exclusive projects in Kuwait. Both projects require an...
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Accounting
XYZ Manufacturing Ltd. is considering two mutually exclusive projects in Kuwait. Both projects require an initial investment of KWD 50,000. The after-tax cash inflows associated with each project are as follows in KWD:
Year
Cash Flows (Project A)
Cash Flows (Project B)
Initial Investment
(50,000)
(50,000)
1
15,000
10,000
2
20,000
15,000
3
10,000
20,000
4
5,000
25,000
Requirements: a. Calculate the payback period for Project A and Project B. b. Determine which project the company should invest in and justify your answer. c. If the cost of capital is 8%, calculate the Net Present Value (NPV) for both projects and decide which project should be chosen based on NPV.
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