XYZ Ltd. is considering two projects, Project X and Project Y, both requiring an initial...
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Accounting
XYZ Ltd. is considering two projects, Project X and Project Y, both requiring an initial investment of GBP 70,000. The projects have the following cash flows:
Year | Cash Flows (Project X) | Cash Flows (Project Y) |
Initial Investment | (70,000) | (70,000) |
1 | 25,000 | 20,000 |
2 | 20,000 | 15,000 |
3 | 15,000 | 25,000 |
4 | 10,000 | 20,000 |
a. Compute the Internal Rate of Return (IRR) for each project.
b. Which project should be selected based on the IRR method if the company's required rate of return is 8%?
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