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 -$180 Project A Project B -$300 -$387 -$193 -$405 $132 $132 -$100 $600 $600 $850 $132 $132 $132 $132 $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. X Open spreadsheet a. What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. Project A: $ Project B: $ b. What is each project's IRR? Round your answer to two decimal places. Project A: % b. What is each project's IRR? Round your answer to two decimal places. Project A: % Project B: % c. 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: % % Project B: d. From your answers to parts a-c, which project would be selected? If the WACC was 18%, which project would be selected? e. 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 0% $ 5 $ 1001 NPV Project B tivity: Capital budgeting criteria minus sign. Discount Rate NPV Project A NPV Project B 0% $ 5 10 $ 12 15 18.1 23.33 f. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations. % g. 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: % Project B: % A Capital budgeting criteria WACC 5 Project A Project B 9 10 11 Project NPV Calculations: 12 NPVA 13 14 NPVB 15 16 Project IRR Calculations: 17 IRRA 18 19 IRRB 20 21 Project MIRR Calculations: 22 MIRRA 23 24 Alternatively, MIRRA can be calculated as: 25 26 Project A 27 28 PV of Year 1 Outflow 29 PV of Year 2 Outflow 30 PV of Year 3 Outflow 31 PV of Year 7 Outflow 32 33 34 35 36 Sum of Outflow PVs 37 38 N 39 PV 40 PMT 41 FV 42 VYR= MIRRA 43 44 MIRRB 45 46 Alternatively, MIRRB can be calculated as: 47 48 Project B 49 50 51 52 53 B 11.00% Formulas #N/A #N/A #N/A #N/A #N/A 7 $0.00 0 $0.00 C 0 -$300 -$405 #N/A #N/A #N/A #N/A #N/A 0 -$300 #N/A 0 -$405 D 1 -$387 $132 Formulas 1 -$387 Formulas #N/A 1 $132 E 2 -$193 $132 2 -$193 2 $132 3 -$100 $132 3 -$100 3 $132 F 4 $600 $132 4 $600 4 $132 G 5 $600 $132 5 $600 5 $132 H I 6 $850 $132 6 $850 6 $132 J 7 -$180 $0 7 -$180 7 $0 K Formulas #N/A #N/A #N/A #N/A Formulas #N/A #N/A #N/A #N/A L FV of Year 6 Inflow at Year 7 FV of Year 5 Inflow at Year 7 FV of Year 4 Inflow at Year 7 Sum of Inflow FVs FV of Year 6 Inflow at Year 7 FV of Year 5 Inflow at Year 7 FV of Year 4 Inflow at Year 7 FV of Year 3 Inflow at Year 7 3 N O P 71 42 VYR MIRRA 43 44 MIRRB 45 46 Alternatively, MIRRB can be calculated as: 47 48 Project B 49 50 51 52 53 54 55 56 57 58 Sum of Outflow PVs 59 60 N 61 PV 62 PMT 63 FV 64 VYR = MIRRB 65 66 Project Acceptance: 67 WACC 68 Accept 69 70 WACC 71 NPVA 72 NPVB 73 Accept 74 75 NPV Profiles: 76 Discount Rates 77 78 79 80 81 82 83 84 85 86 87 88 89 90 threa $1.20 $1.00 0% 5.00% 10.00% 12.00% 15.00% 18.10% 23.33% #N/A NPVA ww.ww 7 $0.00 0 $0.00 11.00% 18.00% $2.66 $56.68 $2.66 #N/A 0 -$405 #N/A 1 $132 Formulas #N/A #N/A #N/A NPVB $56.68 NPV Profiles $132 3 $132 Discount Rates 0% 5.00% 10.00% 12.00% 15.00% 18.10% 23.33% 4 $132 NPVA #N/A #N/A #N/A #N/A #N/A #N/A #N/A $2.66 5 $132 NPVB #N/A #N/A #N/A #N/A #N/A #N/A #N/A $56.68 6 $132 7 $0 Formulas #N/A #N/A #N/A #N/A #N/A #N/A #N/A FV of Year 6 Inflow at Year 7 FV of Year Inflow at Year 7 FV of Year 4 Inflow at Year 7 FV of Year 3 Inflow at Year 7 FV of Year 2 Inflow at Year 7 FV of Year 1 Inflow at Year 7 Sum of Inflow FVs E59 78 79 80 81 82 83 84 85 86 87 88 $1.20 89 90 $1.00 91 92 $0.80 93 94 $0.60 95 96 $0.40 97 98 $0.20 - 99 100 $0.00 101 0% 5.00% 102 103 104 Calculation of Crossover Rate: 105 106 Project A 107 108 Project B 109 110 Project Delta 111 112 113 Crossover Rate = IRRA 114 115 Project MIRR Calculations at WACC = 18% 116 WACC 117 118 MIRRA 119 MIRRB 120 121 122 123 124 125 x U% 5.00% 10.00% 12.00% 15.00% 18.10% 23.33% A fx B 10.00% 18.00% D NPV Profiles 12.00% 0 -$300 -$405 #N/A #N/A #N/A #N/A 1 -$387 $132 #N/A E 2 -$193 $132 #N/A 15.00% 3 -$100 $132 #N/A F U% 5.00% 10.00% 12.00% 15.00% 18.10% 23.33% 18.10% $600 $132 #N/A G #N/A #N/A #N/A #N/A #N/A #N/A #N/A 23.33% 5 $600 $132 #N/A H #N/A #N/A #N/A #N/A #N/A #N/A #N/A I 6 $850 $132 #N/A J 7 -$180 $0 #N/A K L M