Solved: Project with the highest internal rate of return, Finance Basics

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Project with the highest internal rate of return

Question:

I am deciding among two mutually exclusive projects. The two projects have the following cash flows:

Project X
Year 0 -50,000
Year 1 10,000
Year 2 15,000
Year 3 40,000
Year 4 20,000

Project Y
Year 0 -30,000
Year 1 6,000
Year 2 12,000
Year 3 18,000
Year 4 12,000

The company's cost of capital is 10% (WACC = 10%). What is the net present value (NPV) of the project with the highest internal rate of return (IRR)?

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