Question
A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2
A company has a 12% 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 | -$400 | $133 | $133 | $133 | $133 | $133 | $133 | $0 |
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What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent.
Project A: $
Project B: $
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What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.
Project A: %
Project B: %
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What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places.
Project A: %
Project B: %
- From your answers to parts a-c, which project would be selected? -Select-Project AProject BItem 7 If the WACC was 18%, which project would be selected? -Select-Project AProject BItem 8
- Construct NPV profiles for Projects A and B. If an amount is zero, enter 0. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent.
Discount Rate NPV Project A NPV Project B 0% $ $ 5 10 12 15 18.1 24.18 - Calculate the crossover rate where the two projects' NPVs are equal. Do not round intermediate calculations. Round your answer to two decimal places. %
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What is each project's MIRR at a WACC of 18%? Do not round intermediate calculations. Round your answers to two decimal places.
Project A: %
Project B: %
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