Project X has an initial cost of $20,000 and a cash inflow of $25,000 in Year 3.Project Y costs $40,700 and has cash flows of $12,000,$25,000,and $10,000 in Years 1 to 3,respectively.The discount rate is 6 percent and the projects are mutually exclusive.Based on the individual project's IRRs you should accept Project ________; based on NPV you should accept Project ________; the final decision should be to accept Project ________.
A)Y; Y; Y
B)Y; X; X
C)X; Y; Y
D)X; X; X
E)Y; X: Y

Question

Quizplus · Accepted Answer

Project X has an IRR of approximately 20.04% and an NPV of approximately $2,148, while Project Y has an IRR of approximately 15.18% and an NPV of approximately $4,487.

Based on IRR, Project X appears to be the better choice, but when considering NPV, Project Y has a higher value. However, since the projects are mutually exclusive, only one can be selected.

Since Project Y has a higher NPV, it should be selected over Project X, and the final decision is to accept Project Y.

Project X Has an Initial Cost of $20,000 and a Cash