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XYZ Ltd. is contemplating two potential investments, Investment X and Investment Y, with the following characteristics: Investment X: Cost of Capital - 7%, Initial Investment

XYZ Ltd. is contemplating two potential investments, Investment X and Investment Y, with the following characteristics:

  • Investment X: Cost of Capital - 7%, Initial Investment - $200,000, Cash Inflow Year 1 - $50,000, Cash Inflow Year 2 - $60,000, Cash Inflow Year 3 - $70,000
  • Investment Y: Cost of Capital - 11%, Initial Investment - $300,000, Cash Inflow Year 1 - $80,000, Cash Inflow Year 2 - $90,000, Cash Inflow Year 3 - $100,000 Perform a net present value analysis for Investment X and Investment Y. Assess the financial viability of each investment and provide a recommendation.

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