Question: X construction is considering two projects to develop. The estimated net cash flow from each project is as follows: Project X Project Y Year 1
X construction is considering two projects to develop. The estimated net cash flow from each project is as follows:
| Project X | Project Y | |
| Year 1 | 110,000 | 75,000 |
| Year 2 | 65,000 | 150,000 |
| Year 3 | 100,000 | 60,000 |
| Year 4 | 115,000 | 55,000 |
| Year 5 | 35,000 | 60,000 |
Project requires an investment of $200,000. A rate of 15% has been selected for the NPV analysis. Requires to a) Calculate Payback period, ARR, Net Present Value and Profitability Index b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR? Suggest
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