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Choosing the other two methods

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Reference no: EM132531951

"Please don't do it in Excel or Spread sheet. Give me the full explanation for my understanding."

Projects X and Y have the following expected net cash flows:

Project X Project Y

Year Cash Flow Cash Flow

0 -$500,000 -$500,000

1 250,000 350,000

2 250,000 350,000

3 250,000 300,000

4 200,000 200,000

5 150,000

  • Both the projects are of the same company, Deccan Pharma. The most recently paid dividend was $2 and it is growing at 5% for the infinite period of time. Moreover, the stock is selling for $45.
  • Assume you are a finance manager of the company. Which project you should Choose based on NPV? Would your decision change if payback method was used? Or Discounted Payback period?
  • Which method you think is the best to find out the solution and why? Why you are not choosing the other two methods?

Reference no: EM132531951

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