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Beacon Company 400000

Price: $1.99


Beacon Company is considering two different, mutually exclusive capital expenditure
proposals. Project A will cost $400,000, has an expected useful life of 10 years, a
salvage value of zero, and is expected to increase net annual cash fl ows by $70,000. Project
B will cost $280,000, has an expected useful life of 10 years, a salvage value of zero, and is
expected to increase net annual cash flows by $50,000. A discount rate of 9% is appropriate
for both projects. Compute the net present value and profitability index of each project.
Which project should be accepted?

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