Karen Capital is currently evaluating two mutually exclusive projects for her employer High Value, Inc. The relevant cashflows and simple net present…

  1. Karen Capital is currently evaluating two mutually exclusive projects for her employer High Value, Inc. The relevant cashflows and simple net present values for the two projects are shown below. The cost of capital for High Value is 10%. Assuming both projects are repeatable, which project should be selected?

Year

Project X

Project Y

0

-10,000

-10,000

1

6,500

4,800

2

6,500

4,800

3

4,800

NPV

$1,281

$1,937

Question 16 options:

Project X.

Project Y.

Either is equally good, but only one should be adopted.

Both projects should be adopted.

None of the other answers is correct.