You are a financial analyst for Damon Electronics 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 required rate of return for each project is 12 percent. The projects’ expected net cash flows are as follows:

a. Calculate each project’s PB, NPV, IRR, MIRR, and DPB.
b. Which project or projects should be accepted if they are independent?
c. Which project should be accepted if they are mutually exclusive?
d. How might a change in the required rate of return produce a conflict between the NPV and IRR rankings of these two projects? Would this conflict exist if r were 5 percent? (Hint: Plot the NPV profiles.)
e. Why does the conflictexist?

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Expected Net Cash Flows Project Y $(10,000) 3,500 3,500 3,500 3,500 Year Project X $(10,000) 6,500 3,000 3,000 1,000 4