A firm whose cost of capital is 10% is considering two mutually exclusive projects X and Y, the details of which are: Year Project X Project Y Cost X 70 000 Y 70 000 Cash inflows 1 10 000 50 000 2 20 000 40 000 3 30 000 20 000 4 45 000 10 000 5 60 000 10 000
A firm whose cost of capital is 10% is considering two mutually exclusive projects X and Y, the details of which are: Year Project X Project Y Cost X 70 000 Y 70 000 Cash inflows 1 10 000 50 000 2 20 000 40 000 3 30 000 20 000 4 45 000 10 000 5 60 000 10 000
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 15P
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A firm whose cost of capital is 10% is considering two mutually exclusive projects X and Y, the
details of which are:
Year Project X Project Y
Cost X 70 000 Y 70 000
2 20 000 40 000
3 30 000 20 000
4 45 000 10 000
5 60 000 10 000
Calculate the following:
Profitability Index for both projects
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