Reference no: EM132571307

Assume that you are the CFO 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 as follows:

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

Question a. Calculate each project's payback period, net present value (NPV), and internal rate of return (IRR).

Question b. Which project (or projects) is financially acceptable? Explain your answer.