Problem:
Delta Company is evaluating two different capital investments, Project X and Y. Either X or Y would cost $100,000, and the company cannot afford to do both. The company expects that Project X would provide net cash inflows of $30,000 per year for 5 years. For Project Y, the net cash inflows are expected to be as follows:
Delta's cost of capital is 12%
Required:
Question 1: Calculate the present value index for Project X and for Project Y.
Question 2: Indicate whether each of the projects is an acceptable investment.
Question 3: Which of the two projects should Delta implement?
Note: Please show the work not just the answer.