Question
You are analyzing two mutually exclusive projects with the following cash flows: Year Project X Project Y 0 -$3,000,000 -$3,500,000 1 $1,200,000 $1,500,000 2 $1,500,000
You are analyzing two mutually exclusive projects with the following cash flows:
Year | Project X | Project Y |
0 | -$3,000,000 | -$3,500,000 |
1 | $1,200,000 | $1,500,000 |
2 | $1,500,000 | $1,700,000 |
3 | $1,300,000 | $1,200,000 |
4 | $800,000 | $1,800,000 |
a. Calculate the NPV of each project assuming a cost of capital of 12%. Which project is more profitable? b. Determine the IRR of each project. c. Identify which project should be selected based on NPV and IRR. d. Discuss any non-financial factors that should be considered before making the decision.
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Applied Corporate Finance
Authors: Aswath Damodaran
4th edition
978-1-118-9185, 9781118918562, 1118808932, 1118918568, 978-1118808931
