- Capital Budgeting
My small business is considering two mutually exclusive projects, X and Y. Make a recommendation based on Payback method, Discounted payback method, NPV method, IRR, MIRR, PI
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My small business is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below:
Year Project X Cash Flow Project Y Cash Flow
0 -$2,000 -$2,000
1 200 2,000
2 600 200
3 800 100
4 1,400 75
The projects are equally risky, and my small business cost of capital is 12 percent. We must make a recommendation, and must base it on the following calculations.
a. Payback method
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b. Discounted payback method
c. NPV method
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