Question
A company has a 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2
A company has a 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
| 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| Project A | -$300 | -$387 | -$193 | -$100 | $600 | $600 | $850 | -$180 |
| Project B | -$405 | $134 | $134 | $134 | $134 | $134 | $134 | $0 |
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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: $ fill in the blank 2
Project B: $ fill in the blank 3
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What is each project's IRR? Round your answer to two decimal places.
Project A: fill in the blank 4%
Project B: fill in the blank 5%
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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: fill in the blank 6%
Project B: fill in the blank 7%
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From your answers to parts a-c, which project would be selected?
Project AProject B
If the WACC was 18%, which project would be selected?
Project AProject 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% $ fill in the blank 10 $ fill in the blank 11 5 $ fill in the blank 12 $ fill in the blank 13 10 $ fill in the blank 14 $ fill in the blank 15 12 $ fill in the blank 16 $ fill in the blank 17 15 $ fill in the blank 18 $ fill in the blank 19 18.1 $ fill in the blank 20 $ fill in the blank 21 23.97 $ fill in the blank 22 $ fill in the blank 23 -
Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.
fill in the blank 24%
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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: fill in the blank 25%
Project B: fill in the blank 26%
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Fundamentals Of Investing
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
14th Edition
0135175216, 978-0135175217
