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Castle Rock Medical Center expects Projects X and Y to generate the following cash flows:
NOCF = Net Operating Cash Flows
Givens
(thousands)
Years
0
1
2
3
4
5
Initial Investment
(6,500)
Project X
NOCF
5,000
3,000
2,000
1,600
1,000
Project Y
Discount rate for Part a
13%
Discount rate for Part b
8%
a. Determine the NPV for both projects using a cost of capital of 13%
b. Determine the NPV for both projects using a cost capital of 8%
c. At an 8% discount rate, which project should be accepted?
At a 13% discount rate, which project should be accepted? Explain.
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