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 |
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