# MBA560 Financial and Managerial Accounting Module 8 Problem 2 - Delta Company

MBA560 Financial and Managerial Accounting

Module 8 Problem 2.

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: Year Cash inflows Year 1 22,000 Year 2 24,000 Year 3 30,000 Year 4 38,000 Year 5 40,000 Delta's cost of capital is 12%.

Required:

1) Calculate the present value index for Project X and for Project Y.

2) Indicate whether each of the projects is an acceptable investment.

3) Which of the two projects should Delta implement?

Module 8 Problem 2.

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: Year Cash inflows Year 1 22,000 Year 2 24,000 Year 3 30,000 Year 4 38,000 Year 5 40,000 Delta's cost of capital is 12%.

Required:

1) Calculate the present value index for Project X and for Project Y.

2) Indicate whether each of the projects is an acceptable investment.

3) Which of the two projects should Delta implement?

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