XYZ Inc. is reviewing two investment opportunities with the following projected cash flows:YearProject CProject D0-$6,000,000-$5,500,0001$2,000,000$1,800,0002$2,500,000$2,200,0003$3,000,000$2,700,0004$2,500,000$3,000,000a....
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XYZ Inc. is reviewing two investment opportunities with the following projected cash flows:
Year | Project C | Project D |
0 | -$6,000,000 | -$5,500,000 |
1 | $2,000,000 | $1,800,000 |
2 | $2,500,000 | $2,200,000 |
3 | $3,000,000 | $2,700,000 |
4 | $2,500,000 | $3,000,000 |
a. Calculate the NPV of each project using a discount rate of 10%. b. Find the IRR for both projects. c. Determine the profitability index. d. Which project should the company choose based on your analysis? Explain why.
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