A firm whose cost of capital is 10% is considering two mutually exclusive projects X and Y, the details of which are: Year Project X Project Y Cost  X 70 000  Y 70 000 Cash inflows 1 10 000 50 000 2 20 000 40 000 3 30 000 20 000 4 45 000 10 000 5 60 000 10 000

EBK CONTEMPORARY FINANCIAL MANAGEMENT
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ISBN:9781337514835
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Chapter10: Capital Budgeting: Decision Criteria And Real Option
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A firm whose cost of capital is 10% is considering two mutually exclusive projects X and Y, the

details of which are:

Year Project X Project Y

Cost  X 70 000  Y 70 000

Cash inflows 1 10 000 50 000

2 20 000 40 000

3 30 000 20 000

4 45 000 10 000

5 60 000 10 000

 

Calculate the following:

 

Net Present Value at 10% for both projects

Profitability Index for both projects

Internal Rate of Return of the two project

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