Question: Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below: Time X 0 -$2,000-$2,000 1 2

Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below: Time X 0 -$2,000-$2,000 1 2 3 4 Y 200 2,000 600 200 800 100 1,400 75 1. What is the payback period for Project A and B? Which would be chosen and why? 2. If the cost of capital is 10%, what is the discounted payback period for Project A and B? Which would be chosen and why? 3. If the required rate of return on these projects is 10 percent, what are the NPV for Project A and B? Which would be chosen and why? 4. Calculate the profitability index for each project. 5. What is the IRR of both projects?

Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below: 1. What is the payback period for Project A and B? Which would be chosen and why? 2. If the cost of capital is 10%, what is the discounted payback period for Project A and B? Which would be chosen and why? 3. If the required rate of return on these projects is 10 percent, what are the NPV for Project A and B? Which would be chosen and why? 4. Calculate the profitability index for each project. 5. What is the IRR of both projects

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