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A business is evaluating two mutually exclusive projects with the following cash flows. Calculate the NPV and IRR for each project and determine which project
A business is evaluating two mutually exclusive projects with the following cash flows. Calculate the NPV and IRR for each project and determine which project should be selected. Use a discount rate of 10%.
Project X:
- Initial Cost: $500,000
- Year 1: $120,000
- Year 2: $130,000
- Year 3: $140,000
- Year 4: $150,000
- Year 5: $160,000
Project Y:
- Initial Cost: $600,000
- Year 1: $150,000
- Year 2: $160,000
- Year 3: $170,000
- Year 4: $180,000
- Year 5: $190,000
Requirements:
- Calculate the NPV for both projects.
- Calculate the IRR for both projects.
- Decide which project to select based on NPV and IRR.
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