1. You are a financial analyst for Zero Plus Inc. 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 a cost of capital of 12%. The projects' net cash flows are

as follows:

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

(a) Calculate (i) each project's payback period

(ii) each project's NPV

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

(c) Which project should be accepted if they are mutually exclusive?