Draper Consulting must evaluate two capital expenditure proposals. Drapers hurdle rate is 10%. Data for the two proposals follow.

	Proposal X	Proposal Y
Required investment	$120,000	$120,000
Annual after-tax cash inflows	24,000
After-tax cash inflows at the end of years 3, 6, 9, and 12		72,000
Life of the project	12 years	12 years

Using net present value analysis, which proposal is the more attractive option? If Draper has sufficient funds available, should both proposals be accepted?

Cash Flow Discount Factor Present Value 3 Proposal X: 4 Years 1 - 12: Cash Flow; Discount Factor (N = 12, i/YR = 10) 5 Less: Initial Investment 6 Net Present Value (NPV) of Proposal X Cash Flow Discount Factor Present Value 8 Proposal Y: 9 Year 3: Cash Flow; Discount Factor (N = 3, i/YR = 10) 10 Year 6: Cash Flow; Discount Factor (N = 6, i/YR = 10) 11 Year 9: Cash Flow; Discount Factor (N = 9, i/YR = 10) 12 Year 12: Cash Flow; Discount Factor (N = 12, i/YR = 10) 13 Sum of Discounted Cash Flows 14 Less: Initial Investment 15 Net Present Value (NPV) of Proposal Y 16 17 Which proposal is more attractive and why