Castle Rock Medical Center expects Projects X and Y to generate the following cash flows:

a. Determine the net present value for both projects using a cost of capital of 13 percent.

b. Determine the net present value for both projects using a cost of capital of 8 percent.

c. At an 8 percent discount rate, which project should be accepted? At a 13 percent discount rate, which project should be accepted? Explain.

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Project X Year Initial investment Net operating cash flows 0 1 2 3 4 5 ($2,500) $2,300 $1,500 $1,000 $800 $500