As the director of capital budgeting for Denver Corp., you are
evaluating two mutually exclusive projects with the following net
Project X Project Z
Year Cash Flow Cash Flow
0 -$100,000 -$100,000
1 50,000 10,000
2 40,000 30,000
3 30,000 40,000
4 10,000 60,000
If Denver’s cost of capital is 15 percent, which project would you choose?
Project X, since it has the higher IRR.
Project Z, since it has the higher NPV.
Project X, since it has the higher NPV.
Project Z, since it has the higher IRR.
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
WHEN PROJECTS ARE MUTUALLY EXCLUSIVE, WE PREFER THE PROJECT WITH HIGHEST POSITIVE NPV. HERE BOTH PROJECT HAVE NEGATIVE NPV.
SO NONE OF THEM IS TO BE SELECTED
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