You are a financial analyst for the Edelman Engineering pvt Ltd. The director of capital budgeting has asked you to analyse two proposed capital investments, Projects X and Y. The cost of capital for each project is 13%.

The projects' initial cost and expected net cash flows are as follows. The two projects are mutually exclusive projects.

Year CASH FLOW(X) CASH FLOW(Y)

0 -$245 000 -$53 000

1 34 000 31 900

2 49 000 21 800

3 51 000 17 300

4 325 000 16 200

Required

1.If you apply the pay back criterion, which project will you choose? Why?

2.If you apply the NPV criterion, which project will you choose? Why?

If you apply the IRR criterion, which project will you choose? Why?