Analyze the two independent projects, X and Y. Each project costs $10,000, and the firm’s required rate of return is 12%. The expected net cash flows are as follows: Outflows Inflows Projects Year 1 2 3 4 X -10,000 6,500 3,000 3,000 1,000 Y -10,000 3,500 3,500 3,500 5,500 Required: Calculate for each project: Payback Period IRR NPV PI Give your decision regarding acceptation and rejection of the project. Explain which criteria you based your decision upon and why?
Analyze the two independent projects, X and Y. Each project costs $10,000, and the firm’s required rate of return is 12%. The expected net cash flows are as follows: Outflows Inflows Projects Year 1 2 3 4 X -10,000 6,500 3,000 3,000 1,000 Y -10,000 3,500 3,500 3,500 5,500 Required: Calculate for each project: Payback Period IRR NPV PI Give your decision regarding acceptation and rejection of the project. Explain which criteria you based your decision upon and why?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Capital Budgeting Techniques
- Analyze the two independent projects, X and Y. Each project costs $10,000, and the firm’s required
rate of return is 12%. The expected net cash flows are as follows:
|
|
Outflows |
Inflows |
|||
|
Projects |
Year |
1 |
2 |
3 |
4 |
|
X |
-10,000 |
6,500 |
3,000 |
3,000 |
1,000 |
|
Y |
-10,000 |
3,500 |
3,500 |
3,500 |
5,500 |
Required: Calculate for each project:
- Payback Period
- IRR
- NPV
- PI
- Give your decision regarding acceptation and rejection of the project. Explain which criteria you based your decision upon and why?
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