You are asked to evaluate two projects X and Y. The cash flow for each is listed below. The firmAc€?cs cost of capital is 12%. Year X Y 0 (10,000) (10,000) 1 6,500 3,500 2 3,000 3,500 3 3,000 3,500 4 1,000 3,500 Calculate the NPV of each project? [rounded to the nearest tens] Which project would you select? c) Compute the IRR for project X. [up to two decimal places] Based on the IRR criterion, should project X be accepted? Compute the IRR for project Y. [up to two decimal places] Based on the IRR criterion, should project Y be accepted?
You are asked to evaluate two projects X and Y. The cash flow for each is listed below. The firmAc€?cs cost of capital is 12%. Year X Y 0 (10,000) (10,000) 1 6,500 3,500 2 3,000 3,500 3 3,000 3,500 4 1,000 3,500 Calculate the NPV of each project? [rounded to the nearest tens] Which project would you select? c) Compute the IRR for project X. [up to two decimal places] Based on the IRR criterion, should project X be accepted? Compute the IRR for project Y. [up to two decimal places] Based on the IRR criterion, should project Y be accepted?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 6PB: There are two projects under consideration by the Rainbow factory. Each of the projects will require...
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You are asked to evaluate two projects X and Y. The cash flow for each is listed below.
The firmAc€?cs cost of capital is 12%.
|
Year |
X |
Y |
|
0 |
(10,000) |
(10,000) |
|
1 |
6,500 |
3,500 |
|
2 |
3,000 |
3,500 |
|
3 |
3,000 |
3,500 |
|
4 |
1,000 |
3,500 |
Calculate the NPV of each project? [rounded to the nearest tens]
Which project would you select?
c) Compute the IRR for project X. [up to two decimal places] Based on the IRR criterion, should project X be accepted?
Compute the IRR for project Y. [up to two decimal places] Based on the IRR criterion, should project Y be accepted?
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