1) Let the given projects, X and Y where firm can only select one. Project X costs= $1200 and has cash flows of= $147, $211, $352, $478, $526 in each of the next five years. Project Y also costs= $1200, and generates cash flows of $293, $305, $438, $520 for the next four years, respectively.
i) Draw timelines for both projects: X and Y, and compute projects’ NPVs, IRRs, payback periods. Dr. Zeng.
ii) If two projects are independent, which project(s) must be selected? Why? If 2 projects are mutually exclusive, which projects must be selected? Describe why?
iii) Plan NPV profiles for two projects. Recognize the projects’ IRRs on the graph.
iv) If WACC were 5 %t, would this change your recommendation if projects were mutually exclusive? If the WACC were 15%, would this change your recommendation?
Describe your answers.
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