Question
WXY Holdings is considering two mutually exclusive projects. Each project requires an initial investment of $1,000,000. The projected cash inflows are as follows: Year Project
WXY Holdings is considering two mutually exclusive projects. Each project requires an initial investment of $1,000,000. The projected cash inflows are as follows:
Year | Project E | Project F |
0 | -$1,000,000 | -$1,000,000 |
1 | $250,000 | $350,000 |
2 | $300,000 | $300,000 |
3 | $350,000 | $250,000 |
4 | $400,000 | $200,000 |
a.Compute the payback period for both projects. b. Using a discount rate of 11%, calculate the NPV for both projects and indicate which project should be selected.
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Fundamental Managerial Accounting Concepts
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old
7th edition
978-0077632427, 77632427, 78025656, 978-0078025655
