Question
1. Compare the two Mutually Exclusive Projects Below using Internal Rate of Return, Net Present Value and Payback as Criteria for Decision Making: Use three
1. Compare the two Mutually Exclusive Projects Below using Internal Rate of Return, Net Present Value and Payback as Criteria for Decision Making: Use three potential WACC:
Exhibit 1:
Expected Cash Flows
Year Project L Project S
0 -$1,000 -$2,000
1 200 700
2 300 500
3 850 330
a. What is the payback period for each Project?
Evaluate both projects at three different weighted average cost of capital:
b. Find the Internal Rate of Return (IRR)?
c. Find the Net Present Values (NPV) for each project at the three WACCs?
d. Which project would you ultimately choose and why (justify your answer)?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started