Question: Management is evaluating two mutually exclusive projects, X, and Y, with the following cash flows. Year End of year cash flows Project X Project Y

  1. Management is evaluating two mutually exclusive projects, X, and Y, with the following cash flows.
Year End of year cash flows
Project X Project Y
1 -10,000 -10,000
2 3,293 0
3 3,296 0
4 3,293 0
5 3,293 14,641

  1. If the required rate of return on both projects is 5%, which project should management choose? Why?
  2. If the required rate of return on both projects is 14%, which project should management choose? Why?

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