capital budgeting 17

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Instructions

This submission should include all calculations for part (a), completed on the designated tab of the 3-1 final, and a document explaining the implications of your findings for the business or business transaction. After reading the assigned chapters, respond to the following:

You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projects’ expected net cash flows are shown in the table below.

Expected Net Cash Flows

Year

Project X

Project Y

0

– $10,000

– $10,000

1

6,500

3,500

2

3,000

3,500

3

3,000

3,500

4

1,000

3,500

  1. Use the Homework Student Workbook to calculate each project’s net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI).
  2. Which project or projects should be accepted if they are independent?
  3. Which project or projects should be accepted if they are mutually exclusive?

For additional details, please refer to the following critical elements:

Critical Elements

Proficient (100%)

Accuracy of Calculations

Includes detailed calculations, including demonstration of each step taken to

accurately complete the problem

Analysis: Implications

Includes an explanation of the implications of the findings for the business and/or potential business

transaction

Articulation of Response

Submission has no major errors related to citations, grammar, spelling, syntax, or organization

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