Calculate each projects payback period net present value, Ask an Expert

Accounting

Assume that you are the chief financial officer at Porter Memorial Hospital. The CEO has asked you to
analyze two proposed capital investments - Project X and Project Y. Each project requires a net
investment outlay of $10,000, and the cost of capital for each project is 12 percent. The project's expected
net cash flows are:

Year Project X Project Y
0 -$10,000 -$10,000
1 $6,500 $3,000
2 $3,000 $3,000
3 $3,000 $3,000
4 $1,000 $3,000

a. find out each project's payback period, net present value (NPV), and internal rate of return (IRR).
b. Which project (or projects) is financially acceptable? describe your answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M961922

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