Question
Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project
Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value.
| Project X | Project Y | |
| Initial investment | $242,311 | $176,045 |
| Net cash flows anticipated: | ||
| Year 1 | 82,000 | 34,000 |
| Year 2 | 58,000 | 54,000 |
| Year 3 | 93,000 | 73,000 |
| Year 4 | 81,000 | 69,000 |
| Year 5 | 75,000 | 28,000 |
A. Compute the IRR for both projects using the IRR spreadsheet function.
| Project X | % |
| Project Y | % |
B. Which project should be recommended.
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Accounting
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
23rd Edition
978-0324662962
