Your company is considering two mutually exclusive projects, X and Y, whose costs and cash...
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Finance
Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below:
| Time | X | Y |
| 0 | -$2,000 | -$2,000 |
| 1 | 200 | 2,000 |
| 2 | 600 | 200 |
| 3 | 800 | 100 |
| 4 | 1,400 | 75 |
a) What is the payback period for Project A and B? Which would be chosen and why?
b) If the required rate of return on these projects is 10 percent, what are the NPV for Project A and B? Which would be chosen and why?
c) Calculate the profitability index for each project.
d) What is the IRR of both projects?
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