XYZ Ltd. is considering two projects, Project A and Project B, both requiring an initial...
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Accounting
- XYZ Ltd. is considering two projects, Project A and Project B, both requiring an initial investment of $100,000. The after-tax cash flows are as follows:
Year | Project A (USD) | Project B (USD) |
0 | (100,000) | (100,000) |
1 | 30,000 | 20,000 |
2 | 40,000 | 30,000 |
3 | 50,000 | 50,000 |
4 | 60,000 | 70,000 |
5 | 70,000 | 80,000 |
Requirements: a. Compute the payback period for both projects. b. Calculate the IRR for both projects. c. Based on IRR, which project should be selected?
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