Essay
Consider two mutually exclusive projects X and Y with identical initial outlays of $600,000 and useful lives of 5 years.Project X is expected to produce an after-tax cash flow of $180,000 each year.Project Y is expected to generate a single after-tax net cash flow of $1,015,000 in year 5.The discount rate is 14 percent.
a.Calculate the net present value for each project.
b.Calculate the IRR for each project.
c.What decision should you make regarding these projects?
Correct Answer:
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a. NPV of A = $17,955 NPV of B...View Answer
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