Question: PQR Ltd. is evaluating two mutually exclusive projects, Project P and Project Q, with the following characteristics: Project P: Cost of Capital - 10%, Initial

PQR Ltd. is evaluating two mutually exclusive projects, Project P and Project Q, with the following characteristics:

  • Project P: Cost of Capital - 10%, Initial Investment - $250,000, Cash Inflow Year 1 - $70,000, Cash Inflow Year 2 - $80,000, Cash Inflow Year 3 - $90,000
  • Project Q: Cost of Capital - 12%, Initial Investment - $300,000, Cash Inflow Year 1 - $80,000, Cash Inflow Year 2 - $90,000, Cash Inflow Year 3 - $100,000 Perform a discounted cash flow analysis for Project P and Project Q. Determine the net present value for each project and recommend the preferable option.

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