You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12% for both projects. The projects’ expected net cash flows are as follows: Expected Net cash flows Year Project X Project Y 0 -10000 -10000 1 6350 3600 2 2988 3700 3 3145 3500 4 945 3500 Calculate each project’s payback period, net present value (NPV), internal rate of return (IRR), and profitability index (PI)
You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12% for both projects. The projects’ expected net cash flows are as follows: Expected Net cash flows Year Project X Project Y 0 -10000 -10000 1 6350 3600 2 2988 3700 3 3145 3500 4 945 3500 Calculate each project’s payback period, net present value (NPV), internal rate of return (IRR), and profitability index (PI)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12% for both projects. The projects’ expected net
|
Expected Net cash flows |
||
Year |
Project X |
Project Y |
|
0 |
-10000 |
-10000 |
|
1 |
6350 |
3600 |
|
2 |
2988 |
3700 |
|
3 |
3145 |
3500 |
|
4 |
945 |
3500 |
|
Calculate each project’s payback period,
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