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 WACC is 15%, which project would you choose?
A Neither project.
B Project X, since it has the higher IRR.
C Project Z, since it has the higher NPV.
D Project X, since it has the higher NPV.
E Project Z, since it has the higher IRR
Please refer attached file for better understanding of formulas.
PV of a cash flow=FV/(1+r)^n
FV= Future cash flow
Year End Cash flows PV ...
Solution describes the steps for choosing a project from given two mutually exclusive projects by NPV method.