You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projects' expected net cash flows are shown in the table below.

Expected Net Cash Flows

Year	Project X	Project Y
0	$10,000	$10,000
1	6,500	3,500
2	3,000	3,500
3	3,000	3,500
4	1,000	3,500

Use the Homework Student Workbook to calculate each project's net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI).

Which project or projects should be accepted if they are independent?

Which project or projects should be accepted if they are mutually exclusive?

Profitability Index (PI):

To obtain each project's PI, divide its present value of future cash flows by its initial cost. The PV of future cash flows can be found from the NPV calculated earlier:

PVx

=

NPVx

+

Cost of X

=

$

+

$10,000

=

$

PVy

=

NPVy

+

Cost of Y

=

$

+

$

=

$

PIx

=

PVx

Cost of X

=

$

$

=

PIy

=

PVy

Cost of Y

=

$

$

=