Calculate each project payback period-net present value

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Reference no: EM131346527

The following question requires the calculation of the firm's capital budgeting issues expected returns, and financial selection. (Show all of your work-it might help!).

Suppose that you as the chief financial officer for Kindle Memorial Hospital and you were asked by the CEO 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 projects’ 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

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

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

Reference no: EM131346527

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