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 Initial investment $241,666 $181,884 Net cash flows anticipated: Year 1 81,000 36,000 Year 2 59,000 55,000 Year 3 93,000 73,000 Year 4 80,000 68,000 Year 5 75,000 27,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X fill in the blank 1% Project Y fill in the blank 2% B. Which project should be recommended.
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 Initial investment $241,666 $181,884 Net cash flows anticipated: Year 1 81,000 36,000 Year 2 59,000 55,000 Year 3 93,000 73,000 Year 4 80,000 68,000 Year 5 75,000 27,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X fill in the blank 1% Project Y fill in the blank 2% B. Which project should be recommended.
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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Pitt Company is considering two alternative investments. The company requires a 12%
| Project X | Project Y | |
| Initial investment | $241,666 | $181,884 |
| Net cash flows anticipated: | ||
| Year 1 | 81,000 | 36,000 |
| Year 2 | 59,000 | 55,000 |
| Year 3 | 93,000 | 73,000 |
| Year 4 | 80,000 | 68,000 |
| Year 5 | 75,000 | 27,000 |
A. Compute the
| Project X | fill in the blank 1% |
| Project Y | fill in the blank 2% |
B. Which project should be recommended.
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