Question

n y u MUCOLUNS I Deude controversy 5 - MICH... 5 s Question 10 4 pts Porter Memorial Hospital is considering two proposed capital investments, Project X and Project Y. Please see the data for the two projects in the attached Excel sheet and answer the following questions. Show your work in Excel. a) Calculate each project's net present value (NPV) and internal rate of return (IRR). b) Which project is financially acceptable? E TERES MILF LinkCase Report 3 Q10.xlsx Upload Choose a File

Answer 1

: fic year G H 4 year 1/ project X ($) $ 2,000,000 $ 600,000 $ 700,000 $ 1,000,000 $ 1,200,000 project Y ($) op $ 2,500,000 1 $625,000 2 $ 800,000 $ 950,000 4 $1,100,000 3 4 opportunity 14 cost of capital opportunity cost of capital project Y 16 project X 17 NPV 18 IRR NPV $ 394,659.82 23.29% -$ 98,037.81 13.22% IRR project X is financially acceptable reason - because it has a positive NPV and also its IRR is more than the opportunity cost of capital 21

for formulas and calculations, refer to the image below -

A4 X fx year G H I year 4 year 5 0 6 1 7 2 8 3 94 project X ($) -2000000 600000 700000 1000000 1200000 project Y($) -2500000 625000 800000 950000 1100000 opportunity 14 cost of capital 0.15 opportunity cost of capital 0.15 15 16 project X project Y 17 NPV =NPV(B14,B6:19)+B5 NPV =NPV(E14, E6:E9) +E5 18 IRR =IRR(B5:B9,10%) IRR =IRR(E5:E9,10%) 19 20 project X is financially acceptable reason - because it has a positive NPV and also its IRR is more than the opportunity cost of capital

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