Question
A company is considering the following mutually exclusive projects, G and H: Year Project G Cash Flow ($) Project H Cash Flow ($) 0 -60,000
A company is considering the following mutually exclusive projects, G and H:
Year | Project G Cash Flow ($) | Project H Cash Flow ($) |
0 | -60,000 | -75,000 |
1 | 20,000 | 25,000 |
2 | 25,000 | 30,000 |
3 | 30,000 | 40,000 |
4 | 35,000 | 45,000 |
IRR | 17% | 18% |
The cost of capital is 11%.
a) Compute the NPV of both projects. b) Determine which project has the highest NPV. c) Discuss the importance of considering NPV over IRR in mutually exclusive projects. d) Analyze how changes in the cost of capital impact the project selection.
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College Algebra With Modeling And Visualization
Authors: Gary Rockswold
6th Edition
0134418042, 978-0134418049
