Due to a restricted budget, a company can only undertake one of the following projects: Project X: This project has an initial investment of $850,000 and annual profits of $400,000 in year 1, $400,000 in year 2 and $325,000 in year 3. Project Y: This project has an initial investment of $850,000 and a profit of $1,050,000 in year 3. a. Calculate the IRR for Project X. b. Calculate the IRR for Project Y. c. Which project should the company undertake?
Due to a restricted budget, a company can only undertake one of the following projects: Project X: This project has an initial investment of $850,000 and annual profits of $400,000 in year 1, $400,000 in year 2 and $325,000 in year 3. Project Y: This project has an initial investment of $850,000 and a profit of $1,050,000 in year 3. a. Calculate the IRR for Project X. b. Calculate the IRR for Project Y. c. Which project should the company undertake?
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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OLA #11.2
Due to a restricted budget, a company can only undertake one of the following projects:
Project X: This project has an initial investment of $850,000 and annual profits of $400,000 in year 1, $400,000 in year 2 and $325,000 in year 3.
Project Y: This project has an initial investment of $850,000 and a profit of $1,050,000 in year 3.
a. Calculate the
b. Calculate the IRR for Project Y.
c. Which project should the company undertake?
Please reply using algebra with details
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