Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / You are a financial analyst for Damon Electronics Company The director of capital budgetin...

You are a financial analyst for Damon Electronics Company The director of capital budgeting has asked you to analyze two proposed capital investments project X and project Y Each project has a cost

You are a financial analyst for Damon Electronics Company. The director of capital budgeting has asked you to analyze two proposed capital investments, project X and project Y. Each project has a cost of $10,000, and the cost of capital for each project is 12%. The projects’ expected net cash flows are as follows:

Project X Project Y

Period   Cash flows   Cash flows          

   0 - $10,000 - $10,000      

   1                       6,500                    1,000          

   2                       3,000                    1,000          

   3                       3,000                    7,000          

   4                       1,000                    7,000

A.

Y, because it has higher IRR, which is also higher than the cost of capital, 12 percent.

  B.

X, because it has higher IRR, which is also higher than the cost of capital, 12 percent.

  C.

X, because it has higher NPV, which is also positive.

  D.

Both, because both projects have positive NPV and their IRRs are both higher than cost of capital, 12 percent.

  E.

Y, because it has higher NPV, which is also positive.

 

Apr 29 2020 View more View Less

Answer (Solved)

question Subscribe To Get Solution

Related Questions