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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 Project A -$300 -$387 - $193 -$100 $600 $600 $850 -$180 Project B -$400 $132 $132 $132 $132 $132 $132 $0 a. 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: $ x b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: % X Project B: % c. 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: d. From your answers to parts a-c, which project would be selected? Project AV If the WACC was 18%, which project would be selected? Project B e. Construct NPV profiles for Projects A and B. If an amount is zero, enter O. 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 B NPV Project A X 0% $ 5 10 12 8 15 18.1 23.86 f. 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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