Problem 4-2

Ontario, Inc. establishes a 10% hurdle rate for its investment projects. The firm is considering three projects: X, Y, and Z at the end of its fiscal year. Ontario, Inc. has sufficient funds to finance all of these independent projects at the beginning of the new year.

	X	Y	Z
Cost of investment	$200,000	$300,000	$250,000
Cash outflowyear 1	15,000	30,000	50,000
Cash outflowyear 2	25,000	0	60,000
Cash inflowyear 1	30,000	36,000	75,000
Cash inflowyear 2	30,000	40,000	73,000
Cash inflowyear 3	30,000	44,000	61,000
Cash inflowyear 4	30,000	48,000	59,000
Cash inflowyear 5	30,000	52,000	57,000
Cash inflowyear 6	30,000	56,000	55,000
Cash inflowyear 7	30,000	60,000	53,000
Cash inflowyear 8	30,000	64,000	51,000
Cash inflowyear 9	30,000	0	49,000
Cash inflowyear 10	30,000	0	0

Required: Using Excel and its appropriate formulas compute the following for projects X, Y, and Z.

Net present value

Internal rate of return

Determine which projects Ontario should accept and state your reason.