Assume that you are the chief financial officer at Mercy General Hospital. The CEO has asked...

Assume that you are the chief financial officer at Mercy General Hospital. The CEO has asked you to analyze two proposed capital investments - Project X and Project Y. Each project requires a net investment outlay of $75,000, and the cost of capital for each project is 10 percent. The projects' expected net cash flows are as follows.

Year Project X Project Y

0 (75,000) (75,000)

1 20,000 50,000

2 20,000 15,000

3 20,000 15,000

4 30,000 10,000

A) Calculate each project's net present value (NPV) and internal rate of return (IRR)

B) Which project (or projects) is financially acceptable? If you reach different conclusions regarding the financial acceptability of Project X and Project Y, explain why, given that both project return total cash flows of $90,000 over the four year.

Expert Solution

jeff jeffy answered 1 year ago

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