Question
ABC Electronics is planning to invest in a new line of products. The expected cash flows are provided below. The companys cost of capital is
ABC Electronics is planning to invest in a new line of products. The expected cash flows are provided below. The company’s cost of capital is 10%.
Year | Project X | Project Y |
0 | -$100,000 | -$120,000 |
1 | $30,000 | $40,000 |
2 | $40,000 | $50,000 |
3 | $50,000 | $60,000 |
4 | $20,000 | $30,000 |
a. Calculate the internal rate of return (IRR) for each project. b. Determine the net present value (NPV) and decide which project should be undertaken.
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Financial Accounting
Authors: David Spiceland, Wayne Thomas, Don Herrmann
4th edition
1259307956, 978-1259307959
