Due to a restricted budget, a company can only undertake one of the following projects: Project X: This project has an initial investment of $900,000 and annual profits of $425,000 in year 1, $425,000 in year 2 and $350,000 in year 3. Project Y: This project has an initial investment of $900,000 and a profit of $1,000,000 in year 3.

a. Calculate the IRR for Project X.

%

b. Calculate the IRR for Project Y.

%

c. Which project should the company undertake?

Project X

Project Y