Using an EXCEL spreadsheet and showing formulas***
Assume that you are the chief financial officer at Porter Memorial Hospital. The CEO has asked you to analyze two proposed capital investments—Project X and Project Y. Each project requires a net investment outlay of $10,000, and the opportunity cost of capital for each project is 12 percent. The projects’ expected net cash flows are as follows:
Year Project X Project Y
0 $10,000 $10,000
1 6,500 6,500
2 3,000 3,000
3 3,000 3,000
4 1,000 3,000
a. Calculate each project’s payback, NPV, and IRR. b. Which project (or projects) is financially acceptable? Explain your answer.