John Claire, the CFO of Projection Investment Ltd, is considering two mutually exclusive projects. Year 0...

  

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John Claire, the CFO of Projection Investment Ltd, is considering two mutually exclusive projects. Year 0 1 2 3 4 Cash Flow (X) $'000 - 40,000 19,000 15,200 12,400 6,000 Cash Flow (Y) $'000 - 40,000 4,000 12,600 14,900 28,000 In each case, show your calculation clearly. a If he applies the payback criterion, which project will he choose? (5 marks) b If he applies the IRR criterion, which project will he choose? (5 marks) If he applies the NPV criterion with a required return of 9%, which project will he choose? (5 marks) d At which discount rate (correct to 1 decimal place of a percentage) would he be indifferent between these two projects? (10 marks) III E John Claire, the CFO of Projection Investment Ltd, is considering two mutually exclusive projects. Year 0 1 2 3 4 Cash Flow (X) $'000 - 40,000 19,000 15,200 12,400 6,000 Cash Flow (Y) $'000 - 40,000 4,000 12,600 14,900 28,000 In each case, show your calculation clearly. a If he applies the payback criterion, which project will he choose? (5 marks) b If he applies the IRR criterion, which project will he choose? (5 marks) If he applies the NPV criterion with a required return of 9%, which project will he choose? (5 marks) d At which discount rate (correct to 1 decimal place of a percentage) would he be indifferent between these two projects? (10 marks) III E

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The image you provided contains a table that lists cash flows for two mutually exclusive projects X and Y over a fiveyear period from year 0 to year 4 ... View the full answer