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 $254,976 $176,440 Net cash flows anticipated: Year 1 82,000 36,000 Year 2 60,000 56,000 Year 3 91,000 72,000 Year 4 81,000 67,000 Year 5 77,000 26,000 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. Project X
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 $254,976 $176,440 Net cash flows anticipated: Year 1 82,000 36,000 Year 2 60,000 56,000 Year 3 91,000 72,000 Year 4 81,000 67,000 Year 5 77,000 26,000 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. Project X
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 | $254,976 | $176,440 |
| Net cash flows anticipated: | ||
| Year 1 | 82,000 | 36,000 |
| Year 2 | 60,000 | 56,000 |
| Year 3 | 91,000 | 72,000 |
| Year 4 | 81,000 | 67,000 |
| Year 5 | 77,000 | 26,000 |
A. Compute the
| Project X | fill in the blank 1% |
| Project Y | fill in the blank 2% |
B. Which project should be recommended.
Project X
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
Initial investment
$254,976
$176,440
Net cash flows anticipated:
Year 1
82,000
36,000
Year 2
60,000
56,000
Year 3
91,000
72,000
Year 4
81,000
67,000
Year 5
77,000
26,000
A. Compute the IRR for both projects using the IRR spreadsheet function.
Project X
%
Project Y
%
B. Which project should be recommended.
Project X
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