IRRMutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table: E. The firm's cost of capital is 14%. a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRs. b. Which project is preferred? Project X Project Y Initial investment (CF) $500,000 $320,000 Year (t) Cash inflows (CFt) 1 $120,000 $140,000 2 $120,000 $110,000 3 $130,000 $115,000 4 $210,000 $70,000 5 $250,000 $50,000 Payback and NPV Neil Corporation has three projects under consideration. The cash flows for each of them are shown in the following table: E. The firm has a cost of capital of 18%. a. Calculate each project's payback period. Which project is preferred according to this method? b. Calculate each project's net present value (NPV). Which project is preferred according to this method? c. Comment on your findings in parts a and b, and recommend the best project. Explain your recommendation. Initial investment (CF) Year (t) Project C $40,000 1 Project A Project B $40,000 $40,000 Cash inflows (CFt) $14,000 $6,000 $14,000 $10,000 $14,000 $14,000 $14,000 $18,000 $14,000 $22,000 2 3 $22,000 $18,000 $14,000 $10,000 $6,000 4 5