Question: chapter 10- q 15 IRR: Mutually exclusive projects Nile Inc. wants to choose the better of two mutually exclusive projects that expand warehouse capacity. The
chapter 10- q 15
IRR: Mutually exclusive projects Nile Inc. wants to choose the better of two mutually exclusive projects that expand warehouse capacity. The projects' cash flows are shown in the following table
| Project X | Project Y | |||
| Initial investment (CF0) | $500,000 | $330,000 | ||
| Year (t) | Cash inflows (CFt) | |||
| 1 | $110,000 | $150,000 | ||
| 2 | $160,000 | $130,000 | ||
| 3 | $150,000 | $95,000 | ||
| 4 | $180,000 | $70,000 | ||
| 5 | $260,000 | $30,000 | ||
The cost of capital is 17%.
a.Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRs.
b.Which project is preferred?
a.The internal rate of return (IRR) of project X is_____%. (Round to two decimal places.)
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