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Upon initial examining of the cash flows for Exhibit 1, some of the eight projects can be ranked and others dismissed. For example, by adding cash flows and deducting the initial investment, we can immediately conclude a possible project ranking of 3,5,8,4,1,7,6,2.
Project Net Profit(In thousands)
3 $ 8,000.00
5 $ 2,200.00
8 $ 2,150.00
4 $ 1,561.00
1 $ 1,310.00
7 $ 560.00
6 $ 200.00
2 $ 165.00
On initial inspection it would seem prudent to select our four best projects based on which of the four will provide us with the highest return. However, this should not be the primary determinant in measuring how effective each of the projects will be in terms of overall profitability.

In my analysis of the anticipated project cash flows I examined multiple methods. Payback Period, Discounted Payback Period, NPV (Net Present Value), IRR (Internal Rate of Return), and EAA (Equivalent Annual Annuity). While each of these methods was given......

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