Capital Budgeting Homework

completed on the designated tab of the Homework Student Workbook Spreadsheet, 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 $

1

0

,000, and the cost of capital for each is 1

2

%. The projects’ expected net cash flows are shown in the table below.

Expected Net Cash Flows

YearProject XProject Y0

– $10,000

1

,500

2

33,0003,500

3,500

	– $10,000
6,500			3
	3,000		3,500
4	1,000

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?