Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project Y $255,823 $179,373 Initial investment Net cash flows anticipated: Year 1 Year 2 Year 3 Year 4 Year 5 83,000 59,000 93,000 80,000 77,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X Project Y B. Which project should be recommended. Project X % 35,000 54,000 71,000 68,000 28,000 %
Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project Y $255,823 $179,373 Initial investment Net cash flows anticipated: Year 1 Year 2 Year 3 Year 4 Year 5 83,000 59,000 93,000 80,000 77,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X Project Y B. Which project should be recommended. Project X % 35,000 54,000 71,000 68,000 28,000 %
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 21P
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CH11 Q5
![Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value.
Project X Project Y
$255,823
$179,373
Initial investment
Net cash flows anticipated:
Year 1
Year 2
83,000
59,000
93,000
80,000
77,000
A. Compute the IRR for both projects using the IRR spreadsheet function.
Project X
Project Y
Year 3
Year 4
Year 5
%
Project X
%
B. Which project should be recommended.
35,000
54,000
71,000
68,000
28,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe53333ff-7157-47da-9893-1d836f0ec03b%2F26546c2e-3525-4d5f-a99e-46ce4dde459d%2Flwrqpcl_processed.png&w=3840&q=75)
Transcribed Image Text:Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value.
Project X Project Y
$255,823
$179,373
Initial investment
Net cash flows anticipated:
Year 1
Year 2
83,000
59,000
93,000
80,000
77,000
A. Compute the IRR for both projects using the IRR spreadsheet function.
Project X
Project Y
Year 3
Year 4
Year 5
%
Project X
%
B. Which project should be recommended.
35,000
54,000
71,000
68,000
28,000
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