You are a financial analyst for the Brittle Company.
You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projects’ expected net cash flows are shown in the table below.
Expected Net Cash Flows
| Year | Project X | Project Y |
| 0 | – $10,000 | – $10,000 |
| 1 | 6,500 | 3,500 |
| 2 | 3,000 | 3,500 |
| 3 | 3,000 | 3,500 |
| 4 | 1,000 | 3,500 |
- Use the Homework Student Workbook to calculate each project’s net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI).
- Which project or projects should be accepted if they are independent?
- Which project or projects should be accepted if they are mutually exclusive?
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