Question
XYZ Inc. is considering two projects, K and L. Project K requires an initial investment of $40,000 and is expected to yield cash flows of
XYZ Inc. is considering two projects, K and L. Project K requires an initial investment of $40,000 and is expected to yield cash flows of $15,000 annually for 5 years. Project L requires an initial investment of $35,000 and is expected to yield cash flows of $12,000 annually for 5 years. The company's discount rate is 10%.
(a) Calculate the NPV for each project.
(b) State your accept/reject decision for each project.
(c) Determine the IRR for both projects.
(d) Calculate the payback period for both projects.
(e) Which project would you recommend and why?
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Fundamental accounting principle
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
21st edition
978-0078025587
