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ABC Ltd. is considering two alternative investment proposals, A and B, each requiring an initial investment of ₹6,00,000. The expected cash inflows are:

YearProject A (₹)Project B (₹)
12,20,0002,80,000
21,80,0002,20,000
31,50,0001,70,000
41,20,0001,30,000

The company’s normal required return is 10%. The risk premiums applicable to Projects A and B are 3% and 6%, respectively.

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