Question
A company has a 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: Project A -$300
A company has a 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
Project A | -$300 | -$387 | -$193 | -$100 | $600 | $600 | $850 | -$180 |
Project B | -$405 | $134 | $134 | $134 | $134 | $134 | $134 | $0 |
The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.
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What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
Project A: $ 240.64
Project B: $ 161.89
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What is each project's IRR? Round your answer to two decimal places.
Project A: 18.10
Project B:23.97
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What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations.
Project A: 14.59
Project B: 16.46
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From your answers to parts a-c, which project would be selected?
Project A
If the WACC was 18%, which project would be selected?
Project B
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Construct NPV profiles for Projects A and B. Round your answers to the nearest cent. Do not round your intermediate calculations. Negative value should be indicated by a minus sign.
Discount Rate NPV Project A NPV Project B 0% 890 ? 5 540.09 ? 10 283.34 ? 12 200.41 ? 15 92.96 ? 18.1 -.09 ? 23.97 -130.77 .02
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Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.
______________?
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What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations.
Project A: 18.05
Project B: 20.49
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