Initial outlay and length of life

Reference no: EM13820236

Company Y considers 2 mutually exclusive projects to undertake.

The Finance Director prefers the project with the higher NPV while the MD prefers the one with the higher IRR especially since both projects have same initial outlay and length of life.

The company anticipates cost of capital to be 10% and the net after tax cash flows are as follows ($ '000):

Project X

Year 0 : -200

Year 1 : 35

Year 2 : 80

Year 3 : 90

Year 4 : 75

Year 5 : 20

Project Y:

Year 0 : -200

Year 1 : 218

Year 2 : 10

Year 3 : 10

Year 4 : 4

Year 5 : 3

Questions:

a: What are the NPV and IRR of each project

b: Which project would you undertake, if any(with reasoning)

c: Explain inconsistency in ranking of the 2 projects in view of the remarks of the directors

d: Identify the cost of capital at which your recommendation in (b) would be reversed and comment on it please.

Reference no: EM13820236

Questions Cloud

How the company has used the consumer decision process model : In a well-researched essay, explain how the company has used the consumer decision process model to effectively market the product or service to you

Domain of nursing practice : What factors need to be considered when determining whether or not identified actions are within the domain of nursing practice? Be sure to cite current literature in your response.

Examine the theory of globalization : Examine the theory of globalization and its impact on public health. Analyze and evaluate the evolution of systems theory.

Examine relationship among global and national conditions : Examine the relationship among global, national, and local conditions as it relates to your selected region. Identify a particular public health issue in the region as the focus of your project.

Initial outlay and length of life : The Finance Director prefers the project with the higher NPV while the MD prefers the one with the higher IRR especially since both projects have same initial outlay and length of life.

About color memorization : Color Memorization

Detailed and objective description of the human rights issue : A detailed and objective description of the human rights issues as it relates to women's rights, minorities and groups An explanation of the nature of any issue(s) related to those groups and its significance to you as a public administrator An expla..

History of nursing provide a context : How does knowledge of the foundations and history of nursing provide a context in which to understand current practice?

How reliable and accurate are computer models : How reliable and accurate are computer models

User Account

All Pages