Hittle company is considering two mutually exclusive projects x and y. the cost of capital for each project is 10%. the projects’ expected net cash flows are as follows: year project x project y 0 -$10,000 -$10,000 1 4,500 3,500 2 3,000 3,500 3 3,000 3500 4 3000 3500 5 3600 3500 what are the correct npvs of projects x and y, respectively?

Project X:

NPV= $3108,55

Project Y

NPV= $3267,75

Explanation:

Giving the following information, we need to find the net present values of both projects:

Project X:

i=0,10

Cash flow=

0= -$10,000

1= 4,500

2= 3,000

3= 3,000

4= 3000

5=  3600

Project Y:

i= 0,10

Cash flow=

0 = -$10,000

1=3,500

2=3,500

3=3500

4=3500

5=3500

The NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

The formula is:

            n

            t-1

where:

R t     =Net cash inflow-outflows during a single period t

i=Discount rate of return that could be earned in alternative investments

t=Number of timer periods

In this exercise:

Project X:

NPV= -10000 + (4500/1,10^1) + (3000/1,10^2) + (3000/1,10^3) + (3000/1,10^4) + (3600/1,10^5)= $3108,55

Project Y

NPV= $3267,75

answer(8,000.)