# Net Present value

Question # 00005702 Posted By: ACCOUNTS_GURU Updated on: 12/23/2013 01:09 AM Due on: 12/31/2014
Subject Accounting Topic Accounting Tutorials:
Question
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) (\$30,000) (\$30,000)
1 11,000 4,000
2 10,000 8,000
3 9,000 12,000
4 8,000 16,000

a. Calculate each project's Net Present Value (NPV), assuming your firm's weighted average cost of capital (WACC) is 6%

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 6%:

(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?
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1. ## Solution: Net Present value

Tutorial # 00005496 Posted By: ACCOUNTS_GURU Posted on: 12/23/2013 01:13 AM
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