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 -$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.
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: % ______
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.) 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% | $ | $ |
5 | $ | $ |
10 | $ | $ |
12 | $ | $ |
15 | $ | $ |
18.1 | $ | $ |
23.97 | $ | $ |
e.) Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.
% ______
f.) 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: % ______
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