Given

Which project or projects should be accepted if they are independent?

Which project or projects should be accepted if they are mutually exclusive?

a. let Present Value (NPV. NPVX = -$10,000 + $6.500 (1.1211 + $3.000 (1.1212 + $3.000 (1.1213 + $1.000 (1.1254 $966.01 NPV, = -$10,000 + $3.500 (1.1271 + $3.500 (1.1212 + $3.500 (1.1213 + $3.500 (1.1214 $630.72 Internal Rate of Return (IRR): To solve for each project's IRR, find the discount rates that equate each NPV to zero: = IRR IRRY 18% 15% -10000 -10000 6500 3500 3000 3500 3000 3500 1000 3500 Modified Internal Rate of Return (MIRR): To obtain each project's MIRR, begin by finding each project's terminal value (TV) of cash inflows: TVX 6500((1.1253) + 3000'((1.1252) + 3000" ((1.121) + $1,000 $ 17,255.23 TV, 3500' (1.1253 + 3500'(1.1212 + 3500"(1.1251 + $3,500 $ 16,727.65 Now, each project's MIRR is the discount rate that equates the PV of the TV to each project's cost $10,000: = MIRR MIRRY 15% 14% -10000 -10000 6500 3500 3000 3500 3000 3500 1000 3500 " Profitability Index (PI): To obtain each project's Pl. divide its present value of future cash flows by its initial cost. The PV of future cash flows can be found from the NPV calculated earlier PVx NPV: $966.01 + + + Cost of X $10.000 $10.966.01 PV, + = = NPVY $630.72 Cost of Y $10,000 + $10,630.72 PIX PVX $10.966.01 Cost of X $10,000 1.096601 Ply = PV, $10,630.72 Cost of Y $10,000 1.063072