The two projects are as follows. Discount rate = 10%. Project X Project Y 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 Calculate the NPV of project X$6,032.99$4,239.20$7,881.98$4,917.70Calculate IRR of project X.19%49%79%59%Calculate the payback period of project X33 years33 years33 years33 yearsCalculate the crossover rate.93%58%00%17%

Answered: alculate the NPV of project X

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Finance

alculate the NPV of project X

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16EB: Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two,...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

The two projects are as follows. Discount rate = 10%.

Project X Project Y

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

Calculate the NPV of project X

$6,032.99
$4,239.20
$7,881.98
$4,917.70

Calculate IRR of project X.

Calculate the payback period of project X

33 years
33 years
33 years
33 years

Calculate the crossover rate.

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

Expert Solution

Capital Budgeting:

It refers to the long term investment decisions that has been taken by the top management of a company and that are irreversible in nature. These decisions require investment of large amount of the company’s cash.

Calculations of NPV, IRR, Payback period and Crossover rate:

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