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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: 4 0 1
A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 4 0 1 1 2 3 5 6 7 + + Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$400 $134 $134 $134 $134 $134 $134 $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: $ b. What is each project's IRR? Do not round intermediate calculations. Round your answers 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.) 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? -Select- If the WACC was 18%, which project would be selected? -Select- 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 A NPV Project B 0% % $ $ $ 5 10 12 15 18.1 24.51 f. Calculate the crossover rate where the two projects' NPVs are equal. Do not round intermediate calculations. Round your answer to two decimal places. % g. What is each project's MIRR at a WACC of 18%? Do not round intermediate calculations. Round your answers to two decimal places. a Project A: % Project B: %
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