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 %

Essentials Of Investments
11th Edition
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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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
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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