Question
Good old XYZorp (they're back!)? is considering two mutually exclusive projects, A & B in order to expand their product line.? After letting the cost
Good old XYZorp (they're back!)? is considering two mutually exclusive projects, A & B in order to expand their product line.? After letting the cost accountants out of their cages, it was determined that project A's initial investment must be $42,400, while project B will cost $60,000. Project A has projected cash inflows of $25,000 per year for three years.? Project B's inflows are more variable:? $10,000 in year 1; $30,000 in year 2; and $40,000 in its final year. The firm's cost of capital is 12%.? YES - this IS important! Using NPV analysis, if the NPV for project? B = + $ 1,320 (yes, I did the computation for you!), which project do you prefer?? In other words - which project will have the higher NPV.
P-3. Given the information for project A in problem P-2, what is this project's IRR?
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