is attempting to select the best of three mutualy exclusive projects, X, Y, and

Question

is attempting to select the best of three mutualy exclusive projects, X, Y, and Z. Athough all the projects have 5-year lives, they possess differing of risk Project X is in class V, the highest-risk class; project Y is in class II, the a. Find the risk-adjusted NPV for each project to the nearest cent) contents into a Project Z Project X $180 Project Y Initial investment (CFo) b. Which project, if any, would you recommend that the firm undertake? $80,000$50,000 88.000 88,000 88.000 88.000 73,000 80,000 80,000 Project Project Project 59,000 Second: Risk Classes and RADRS 13.5 5.3 19.1 Average risk Highest risk

Explanation / Answer

Project X NPV

Net Present Value =16,815

Project Y Net present Value

Net Present Value =4725

Project Z Net Present Value

Net Present Value =-37092

PART - 4

Decision : Project X is Selected because highest Net Present Value.

Year Cashflow PVF @22.2 Discounted Cash Flow 0 -180000 1 -180000 1 80000 0.8183 65464 2 73000 0.6697 48888 3 60000 0.5480 32880 4 59000 0.4485 26462 5 63000 0.3670 23121

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