Projects X and Y both require an initial investment of $100,000. Project X will generate an annual operating profit of $25,000 per year for six years. Project Y produces no profit in the first year but will yield an annual profit of $25,000 for the seven subsequent years. Rank the projects based on their payback periods and on their NPVs (at a 10% cost of capital).

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The Answer of Projects X and Y both require an initial investment of $100,000. Project X will generate an annual operating profit of $25,000 per year for six years. Project Y produces no profit in the first year but will yield an annual profit of $25,000 for the seven subsequent years. Rank the projects based on their payback periods and on their NPVs (at a 10% cost of capital).

Projects X and Y Both Require an Initial Investment of $100,000