Whitley Company is considering two capital investments

Both investments have #475

Whitley Company is considering two capital investments. Both investments have an initial cost
of $5,000,000 and total net cash inflows of $8,000,000 over 10 years. Whitley requires a 10%
rate of return on this type of investment. Expected net cash inflows are as
follows:Requirements1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if
any, should the company pursue?2. Explain the relationship between NPV and IRR. Based on
this relationship and the company’s required rate of return, are your answers as expected in
Requirement 1? Why or why not?3. After further negotiating, the company can now invest with
an initial cost of $4,800,000. Recalculate the NPV and IRR. Which plan, if any, should the
company pursue?View Solution:
Whitley Company is considering two capital investments Both investments have

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