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Net Present value




Question;It's time to decide how to use the money your firm is expected to make this year. Two investment opportunities are available, with net cash flows as follows:Year Project X Project Y0 (Now) ($30,000) ($30,000)1 11,000 4,0002 10,000 8,0003 9,000 12,0004 8,000 16,000a. Calculate each project's Net Present Value (NPV), assuming your firm's weighted average cost of capital (WACC) is 6%b. Calculate each project?s Internal rate of Return (IRR).c. Plot NPV profiles for both projects on a graph).d. Assuming that your firm's WACC is 6%:(1) If the projects are independent which one(s) should be accepted?(2) If the projects are mutually exclusive which one(s) should be accepted?


Paper#38284 | Written in 18-Jul-2015

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