Given the Cash Flow Stream of the Following Mutually Exclusive

question 15

Essay

Given the cash flow stream of the following mutually exclusive projects, prove through the incremental investment that Project B, with the higher NPV, will be preferred to project
A.
0 1 2 3 NPV IRR
Project A: -500 150 245 320 46.39 17.76
Project B: -800 360 360 360 50.01 16.65
Incremental investment in B: -300 210 115 40 NPV = 3.63

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Definitions:

Payroll

Payroll is the total sum of all compensation a business must pay to its employees for a set period or on a given date, including salaries, wages, bonuses, deductions, and withholdings.

Adjusting Entry

A journal entry made in accounting to update the balances of accounts at the end of an accounting period.

Workweek

A fixed time period, typically structured from Monday to Friday, used to calculate hours worked and wages for employees.

Interest Expense

The cost incurred by an entity for borrowed funds over a period, often expressed as an annual rate.