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PQR Inc. is reviewing two mutually exclusive projects. The cost of capital is 11% and the tax rate is 28%. Project X: Initial Investment: $3,500,000

PQR Inc. is reviewing two mutually exclusive projects. The cost of capital is 11% and the tax rate is 28%.

Project X:

  • Initial Investment: $3,500,000
  • Life: 4 years
  • Annual Pre-tax Cash Flow: $1,200,000
  • Depreciation: Straight-line

Project Y:

  • Initial Investment: $6,000,000
  • Life: 5 years
  • Annual Pre-tax Cash Flow: $1,800,000
  • Depreciation: Straight-line

Calculate:

  1. Discounted payback period.
  2. Net Present Value (NPV).
  3. Internal Rate of Return (IRR).
  4. Modified Internal Rate of Return (MIRR).

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