Reference no: EM132588239

Assume that you are the CFO at Porter Memorial Hospital. The CEO has asked you 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 project's 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

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

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