Your company is presented with two proposals, ABC and XYZ, with equal risks that require initial investments of $95,000 and $100,000 respectively. Assume a cost of capital of 14%. Subsequent after tax end-of-year net cash inflows are given as follows:

(a) Place your answer for each of the proposals by ranking method in the table below.
(b) For each ranking method, what is the better choice? "ABC" or "XYZ"? Circle the better choice. (There should be only ONE answer circled PER row.)

If mutually exclusive projects are being evaluated, NPV and IRR criteria may not always lead to the same accept/reject decision. Explain. (Marks will be awarded on the basis of explanation.)

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Year Proposal ABC Proposal XYZ $32,500 35,000 35,000 35,000 1 $30,000 30,000 30.000 30,000 2 3 4 Year Proposal ABC Proposal XYZ $32,500 35,000 35,000 35,000 1 $30,000 30,000 30.000 30,000 2 3 4

Answer rating: 100% (QA)

PROJECT ABC Year Cash flow Cumulative cash flow PVIF at 14 PV at 14 PVIF at 17 PV at 17 PVIF at 16 PV at 16 0 95000 95000 1 95000 10000 95000 100000 9... View the full answer