Question: Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below: Year 0 1 2 3 4

Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below: Year 0 1 2 3 4 X ($1000) 100 300 400 700 Y ($1000) 1000 100 50 50 The projects are equally risky, and their cost of capital is 12 percent. Based on the internal rate of return, which one do you recommend? Whats the meaning of the IRR?

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