Question
You are considering two mutually exclusive projects: Project X-10 is expected to generate cash flows of $3,250 each year of its 5 year life. The
You are considering two mutually exclusive projects:
Project X-10 is expected to generate cash flows of $3,250 each year of its 5 year life. The project will cost $11,000.
Project X-25 is expected to produce $8,000 in cash flows per year. It also has a 5 year life, and costs $27,750.
The Cost of Capital is 12% and these projects are of normal risk.
- Calculate the NPV, IRR, and MIRR for each of the projects.
- Given that they are mutually exclusive, which project should be selected based on each ranking
- method?
- Now which project should be chosen? Why?
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Derivatives Markets
Authors: Robert L. McDonald
2nd Edition
032128030X, 978-0321280305
