Top Gun Construction Co. is evaluating two projects. Each project requires a $20,000 investment. Project x is the purchase of a concrete pump. Project Y is a hydraulic scissor lift. You have calculated the NPV and IRR for each project based on a 9% discount rate and have arrived at the following results: The NPV of x is $2,551.83 and the IRR of x i

Question

Top Gun Construction Co. is evaluating two projects. Each project requires a

$20,000

investment. Project

x

is the purchase of a concrete pump. Project

Y

is a hydraulic scissor lift. You have calculated the NPV and IRR for each project based on a

9%

discount rate and have arrived at the following results: The NPV of

x

is

$2,551.83

and the IRR of

x

is

14%

. The NPV of

Y

is

$1,976.03

and the IRR of

Y

is

16.29%

Based on the information provided, the correct decision is Multiple Choice

◻

Accept

Y

because it has the highest IRR. Reject both because the payback period is too high. Accept both projects because they have positive NPVs. Accept

x

because it has the highest NPV and they are mutually exclusive.

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