Joliet Company is considering two alternative investments. The company requires an 18% return from its investments. CategoryProject XProject YInitial Investment108,000$98,000Net cash flows anticipated: Year 136,00025,000Year 239,00045,000Year 332,00042,000Year 434,00028,000Year 525,00017,000Compute the IRR for both Projects and recommend one of them.

NPV :— It is the sum of present value of all cash flows. IRR :— It is the rate of return at which…

Answered: Joliet Company is considering two…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Joliet Company is considering two alternative investments. The company requires an 18% return from its investments.

Category	Project X	Project Y
Initial Investment	108,000	$98,000
Net cash flows anticipated:
Year 1	36,000	25,000
Year 2	39,000	45,000
Year 3	32,000	42,000
Year 4	34,000	28,000
Year 5	25,000	17,000

Compute the IRR for both Projects and recommend one of them.

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18% was the desirable rate of return? How did you come up with 15% and 20% PVF?

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