Question: Solora Inc. is considering Projects X and Y, whose cash flows are shown below. These projects are equally risky. Firm;s WACC=10%. Year 0 1 2

Solora Inc. is considering Projects X and Y, whose cash flows are shown below. These projects are equally risky. Firm;s WACC=10%.


Year	0	1	2	3	4
CF-X	$1,100	$375	$375	$375	$375
CF-Y	$2,200	$725	$725	$725	$725

a) Calculate Payback Period for these two projects. Which one do you choose if the Threshold is less than 3 years?

b) Calculate NPV for these two projects. Are they acceptable? Why? Which one do you choose if they are independent? What about if they are mutually exclusive? c) Calculate IRR for these two projects. Are they acceptable? Why? Which one do you choose if they are independent? What about if they are mutually exclusive? d) Do NPV & IRR reach to the same conclusion? If not, on what basis you choose any of these project and why?

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