Assume you are the chief financial officer at Lehman Memorial Hospital. The CEO has asked you to analyze two proposed capital investment Project X and project Y each project requires a net investment outlay of $12,000 and the opportunity cost of capital for each project is 14% the project's expected net cash flows are as following Year Project x Project Y 0 (12,000) (12,000) 1 6,600 3,500 2 3,500 3,500 3 3,500 3,500 4 3,500 3,500 Calculate each project’s payback, NPV and IRR. Which project is financially acceptable? Explain
Assume you are the chief financial officer at Lehman Memorial Hospital. The CEO has asked you to analyze two proposed capital investment Project X and project Y each project requires a net investment outlay of $12,000 and the opportunity cost of capital for each project is 14% the project's expected net cash flows are as following Year Project x Project Y 0 (12,000) (12,000) 1 6,600 3,500 2 3,500 3,500 3 3,500 3,500 4 3,500 3,500 Calculate each project’s payback, NPV and IRR. Which project is financially acceptable? Explain
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 21P: Your division is considering two investment projects, each of which requires an up-front expenditure...
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.Assume you are the chief financial officer at Lehman Memorial Hospital. The CEO has asked you to analyze two proposed capital investment Project X and project Y each project requires a net investment outlay of $12,000 and the opportunity cost of capital for each project is 14% the project's expected net
Year |
Project x |
Project Y |
0 |
(12,000) |
(12,000) |
1 |
6,600 |
3,500 |
2 |
3,500 |
3,500 |
3 |
3,500 |
3,500 |
4 |
3,500 |
3,500 |
- Calculate each project’s payback, NPV and
IRR .
- Which project is financially acceptable? Explain
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