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Consider the following projects, X and Y where the firm can only choose one. Project X costs $600 and has cash flows of $400 in
Consider the following projects, X and Y where the firm can only choose one. Project X costs $600 and has cash flows of $400 in each of the next 2 years. Project Y also costs $600, and generates cash flows of $500 and $275 for the next 2 years, respectively. Which investment should the firm choose if the cost of capital is 25 percent?
A | Project Y, since it has a higher NPV than Project X | |
| B | neither, since both the projects have negative NPV | |
| C | Project X, since it has a higher NPV than Project Y | |
| D | neither, since both the projects have positive NPV |
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The Company Valuation Playbook Invest With Confidence
Authors: Charles Sunnucks
1st Edition
1838470816, 978-1838470814
