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Problem:

Delta Company is evaluating two different capital investments, Project X and Y. Either X or Y would cost $100,000, and the company cannot afford to do both. The company expects that Project X would provide net cash inflows of $30,000 per year for 5 years. For Project Y, the net cash inflows are expected to be as follows:

Delta's cost of capital is 12%

Required:

Question 1: Calculate the present value index for Project X and for Project Y.

Question 2: Indicate whether each of the projects is an acceptable investment.

Question 3: Which of the two projects should Delta implement?

Note: Please show the work not just the answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91165267

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