You are asked to evaluating two manually exclusive projects x and y. the cash flow for...

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Finance

You are asked to evaluating two manually exclusive projects xand y. the cash flow for each is listed below along with thecalculated npv and irr. the firm's cost of capital is 12%.
Calculate the NPV of each project. Which project would youaccept based on NPV criterion and why?
What Is the IRR of each project?
Would you accept/reject decision change for the projects X andY if the cost of capital increased to 18%?
Year
Cash flow x
Cash flow y
0
-350,000
-35,000
1
25,000
17,000
2
70,000
11,000
3
70,000
17,000
4
430,000
11,000

Answer & Explanation Solved by verified expert

3.8 Ratings (576 Votes)

CF X Discount rate 12000 Year 0 1 2 3 4 Cash flow stream 350000 25000 70000 70000 430000 Discounting factor 1000 1120 1254 1405 1574 Discounted cash flows project 350000000 22321429 55803571 49824617 273272774 NPV Sum of discounted cash flows NPV CF X 5122239 Where Discounting factor 1 discount rateCorresponding period in years Discounted See Answer

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Transcribed Image Text

You are asked to evaluating two manually exclusive projects xand y. the cash flow for each is listed below along with thecalculated npv and irr. the firm's cost of capital is 12%.Calculate the NPV of each project. Which project would youaccept based on NPV criterion and why?What Is the IRR of each project?Would you accept/reject decision change for the projects X andY if the cost of capital increased to 18%?YearCash flow xCash flow y0-350,000-35,000125,00017,000270,00011,000370,00017,0004430,00011,000

Year	Cash flow x	Cash flow y
0	-350,000	-35,000
1	25,000	17,000
2	70,000	11,000
3	70,000	17,000
4	430,000	11,000