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Homework answers / question archive / 1) You are considering the following two mutually exclusive projects

1) You are considering the following two mutually exclusive projects

Finance

1) You are considering the following two mutually exclusive projects. The required rate of return is 8% for project ABC and 10% for project XYZ. 
Year               Project ABC             Project XYZ

0                     -500000                    -800000

1                      300,000                    500,000

2                      150,000                    250,000

3                      100,000                    200,000 
 a) Based on the net present value method of analysis and given the information in the problem, which project you would should? Show your calculation. 

b) Required payback period 2 year and 5 months for both Project ABC and XYZ, which project should you accept and why?

 

2) Based on the cash flows shown below, compute the IRR and MIRR for Project Erie. Suppose that the appropriate cost of capital is 12 percent. Advise the organization about whether they should accept or reject the project. Time (T); Cash Flow (CF)

(T) (CF)

0 - -12,000

1 - 2,360

2 - 4,390

3 - 1,520

4 - 980

5 - 1,250

 

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