PQR Inc. is evaluating two mutually exclusive projects, Project X and Project Y. Each project...
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Accounting
- PQR Inc. is evaluating two mutually exclusive projects, Project X and Project Y. Each project requires an initial investment of $200,000. The expected cash flows are as follows:
Year | Project X (USD) | Project Y (USD) |
0 | (200,000) | (200,000) |
1 | 60,000 | 40,000 |
2 | 70,000 | 60,000 |
3 | 80,000 | 80,000 |
4 | 90,000 | 100,000 |
5 | 100,000 | 120,000 |
Requirements: a. Calculate the NPV for both projects assuming a discount rate of 10%. b. Determine the payback period for both projects. c. Recommend which project should be selected based on NPV and why.
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