Question: Consider the following two mutually exclusive projects (X and Y) available to you: Year Cash Flow (X) Cash Flow (Y) 0 -$ 170,000 - $
- Consider the following two mutually exclusive projects (X and Y) available to you:
| Year | Cash Flow (X) | Cash Flow (Y) |
| 0 | -$ 170,000 | - $ 136,000 |
| 1 | 112,000 | 26,000 |
| 2 | 66,000 | 56,000 |
| 3 | 26,000 | 96,000 |
|
|
|
|
| IRR | 12.48% | 12.07% |
Whichever project you choose, if any, you require a 10 percent return on your investment.
- Calculate the payback period for each project. (6 marks)
- Calculate the net present value (NPV) of each project (6 marks)
- Based on your calculated answers above about Payback Period, NPV as well as the given IRR, which project will you finally choose? Why? (3 marks)
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