Question: Given the following data for Project X and Project Y: Year Cash Flows (X) Cash Flows (Y) 0 -12,000 -8,000 1 4,000 2,000 2 4,000
Given the following data for Project X and Project Y:
Year | Cash Flows (X) | Cash Flows (Y) |
0 | -₹12,000 | -₹8,000 |
1 | ₹4,000 | ₹2,000 |
2 | ₹4,000 | ₹3,000 |
3 | ₹5,000 | ₹4,000 |
4 | ₹7,000 | ₹5,000 |
Requirements:
- Calculate the Payback Period for both projects.
- Determine the Discounted Payback Period at a cost of capital of 12%.
- Calculate the NPV for both projects at a discount rate of 12%.
- If the standard payback period is 3 years, which project will you select?
- Compare the profitability index of both projects.
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