Your company is considering two mutually exclusive projects. X1 and X2; also considered are 2 projects, Y
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Question:
Your company is considering two mutually exclusive projects. X1 and X2; also considered are 2 projects, Y and Z. Independant of the X projects and each other. The project costs and the cash flows are shown below.
Years | X1 | X2 | Y | Z |
0 | -$2000 | -$2000 | -$15000 | -$25000 |
1 | 200 | 2000 | 5000 | 8500 |
2 | 600 | 200 | 5000 | 8500 |
3 | 800 | 100 | 5000 | 8500 |
4 | 1400 | 75 | 5000 | 8500 |
Projects X1 and X2 are equally risky, and the firms required rate of return is 12%. Which project should be accepted and which should be rejected? Please base your decision on any method, but justify the use of the method you have choosen.
Related Book For
Intermediate Financial Management
ISBN: 978-1285850030
12th edition
Authors: Eugene F. Brigham, Phillip R. Daves
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