Its time to decide how to use the money your firm is

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Reference no: EM13380708

It's time to decide how to use the money your firm is expected to make this year.  Two investment opportunities are available, with net cash flows as follows:

                                    Year                Project X         Project Y

                                     0 (Now)         ($20,000)        ($20,000)

                                     1                        8,500              4,200

                                     2                        7,000              5,700

                                     3                        5,500              7,200

                                     4                        4,000              8,700

a.  Calculate each project's Net Present Value (NPV), assuming your firm's weighted average cost of capital (WACC) is 7%

b.  Calculate each project's Internal rate of Return (IRR).

c.  Plot NPV profiles for both projects on a graph).

d.  Assuming that your firm's WACC is 10%:

            (1) If the projects are independent which one(s) should be accepted?

            (2) If the projects are mutually exclusive which one(s) should be accepted?

Reference no: EM13380708

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