Question
Urban Development Corp is considering two real estate development projects, Project East and Project West. The following are the projected cash flows: Year Project East
Urban Development Corp is considering two real estate development projects, Project East and Project West. The following are the projected cash flows:
Year | Project East | Project West |
0 | $(400) | $(350) |
1 | 100 | 120 |
2 | 150 | 130 |
3 | 200 | 140 |
4 | 250 | 160 |
The firm's hurdle rate is 8%. Analyze the following:
a. Compute the payback period for each project. b. Calculate the NPV for both projects. c. Determine the IRR for each project. d. Which project should be chosen based on NPV and IRR? e. Discuss the financial implications of choosing Project East over Project West.
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
9781285586618
