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18. A firm is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable.
18. A firm is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. You are hired to advise the firm on the best procedure. If WACC is not known, what could be your advice? Graphical illustration is NPV profiles for both projects. (Hint: You need to find The Crossover Rate using the Incremental Analysis.) (8 points) WACC: Unknown Year CF of Projects CF of Project L 0 $1,025 - $2,150 1 380 765 2 380 765 3 380 765 4 380 765 -200 0% 5% 10% 15% 20%
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