What are the npv and irr of each project which project

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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.

- Excel can be used

Reference no: EM13478723

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