2) ASB Corp. is considering the following two project proposals X and Y. The projected cash flows for project X, and Y are as follows: End of Period: Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Project X -580 -218 438 420 656 220 Project Y 2000 -1440 -720 -360 -180 744 The effective annual required rate of return for both projects is 32%. If only one of the two projects can be accepted, use the IRR method with incremental project (Y - X) to show which project is preferred. Explain your result. (HINT: Determine whether Project (Y - X) has multiple IRRs.)

I'M HAVING PROBLEMS WORKING ON THIS PROBLEM AND DRAWING A TIMELINE.

16)

You are informed that the effective annual required rate of return is 10%. Cash flows for the

projects are indicated in the table below (in thousands of dollars):

Year 0 1 2 3

A -1,800 600 1,000 1,200

B 12,000 -600 -10,800 -5,000

For the following problems, draw all timelines and show all your work (i.e. express al formulas used with values in

place of variables).

a) Consider Project A and Project B independent projects. Calculate the internal rate of return

(IRR) for Project A. Calculate the IRR for the Project B. According to your calculations and

the IRR decision criterion, would you recommend Project A, Project B or both?

b) Consider Project A and Project B mutually exclusive projects. Calculate the PI for the

incremental Project A over B. Using the PI decision criterion, what would you recommend?