Question: A firm is considering two mutually exclusive projects with the following cash flows: Project X Project Y Year 1 $ 40,000 $120,000 Year 2 80,000

A firm is considering two mutually exclusive projects with the following cash flows:

Project X

Project Y
Year 1

$ 40,000

$120,000
Year 2

80,000

80,000
Year 3

120,000

40,000

Each project requires an investment of $100,000. The cost of capital is 10%. Which project will have the higher net present value?

a.

Project X

b.

Project Y

c.

Project X and Project Y will have the same net present value.

d.

Not enough information is given.

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