The following table presents the forecasted cash flows for Project X and Project Y. These two projects are mutually exclusive.
Time Project X Project Y
0 -45,000 -49,000
1 7,000 26,000
2 9,000 21,000
3 19,000 13,000
4 32,000 7,000
Construct a NPV profile to illustrate whether the project choice is dependent upon the discount rate. Your NPV profile should include the following information:
a. The NPV of both projects at discount rates of 0%, 10%, and 20%,
b. The IRR of both projects,
c. The incremental IRR (crossover rate) for the two projects (if it exists).
Clearly explain the conclusions to be drawn from the NPV profile