A company is considering the following two projects: Project X Initial investment: $100,000 Year 1: $40,000 Year
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Question:
A company is considering the following two projects:
- Project X
- Initial investment: $100,000
- Year 1: $40,000
- Year 2: $50,000
- Year 3: $60,000
- IRR: 18%
- Project Y
- Initial investment: $150,000
- Year 1: $60,000
- Year 2: $70,000
- Year 3: $80,000
- IRR: 15%
The discount rate is 12%.
a) Calculate the NPV for both projects.
b) Determine which project to invest in based on NPV.
c) Discuss how the scale of investment impacts the decision despite different IRRs
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ
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