Q.

Cummings Products Company is considering two mutually exclusive investments. The projects expected net cash flows are as follows:

Expected Net Cash Flows

Year Project X Project Y

0 (400) (450)

1 (350) (100)

2 400 400

3 450 250

4 175 500

If you want to select one of the project for investment purpose, which one will you prefer? Use 12% cost of capital for the calculation.