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St Lucia Riverside Ltd. has two mutually exclusive projects, as shown below: Year Project X ($) Project Y ($) 0 -10,000 -15,000 1 6,000 6,000
St Lucia Riverside Ltd. has two mutually exclusive projects, as shown below:
Year Project X ($) Project Y ($)
0 -10,000 -15,000
1 6,000 6,000
2 4,500 8,000
3 2,000 6,000
St Lucias management requires that the project be paid back within two years. Calculate the payback period for each project. St Lucia now uses the NPV rule to rank these projects. Calculate the NPV for each project, assuming the discount rate is 10%. Which project should St Lucia choose? Explain
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