A business is evaluating two mutually exclusive projects. Project A requires an immediate investment of $6000 plus another $8000 in three years. It would produce a profit of $6000 in the second year, $18,000 in the fourth year, and $12,000 in the seventh year. Project B requires an immediate investment of $5000, another $8000 in two years, and a further $5000 in four years. It would produce an annual profit of $5400 for seven years. Neither project would have any residual value after seven years. Which project should be selected if the required rate of return is 14%? What is the economic advantage, in current dollars, of the preferred project over the other?

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The Answer of A business is evaluating two mutually exclusive projects. Project A requires an immediate investment of $6000 plus another $8000 in three years. It would produce a profit of $6000 in the second year, $18,000 in the fourth year, and $12,000 in the seventh year. Project B requires an immediate investment of $5000, another $8000 in two years, and a further $5000 in four years. It would produce an annual profit of $5400 for seven years. Neither project would have any residual value after seven years. Which project should be selected if the required rate of return is 14%? What is the economic advantage, in current dollars, of the preferred project over the other?

A Business Is Evaluating Two Mutually Exclusive Projects