Suppose your firm is evaluating four potential new investments. You calculate that these projects, W, X, Y, and Z, have the NPV and IRR figures given below: Project W: NPV = $7,000 IRR = 13% Project X: NPV = $-4,000 IRR = 15% Project Y: NPV = $5,000 IRR = 10% Project Z: NPV = $800 IRR = 18% a) Which project(s) should be accepted if they are independent? Clearly explain your reasoning. b) Which project(s) should be accepted if they are mutually exclusive? Clearly explain your reasoning.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
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Chapter10: Capital Budgeting: Decision Criteria And Real Option
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Suppose your firm is evaluating four potential new investments. You calculate that these projects, W, X, Y, and Z,
have the NPV and IRR figures given below:
Project W: NPV = $7,000 IRR = 13%
Project X: NPV = $-4,000 IRR = 15%
Project Y: NPV = $5,000 IRR = 10%
Project Z: NPV = $800 IRR = 18%
a) Which project(s) should be accepted if they are independent? Clearly explain your reasoning.
b) Which project(s) should be accepted if they are mutually exclusive? Clearly explain your reasoning.

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