A company has a 13% 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	$132	$132	$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.

Open spreadsheet

1. What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

   Project A: $

   Project B: $

2. What is each project's IRR? Round your answer to two decimal places.

   Project A:

   Project B:

3. 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:

5. 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
   23.86		$ fill in the blank 23

6. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.

7. 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:

Capital budgeting criteria WACC 13.00% 0 0 -$300 1 $387 2 -S193 3 -$100 4 $600 5 S600 6 $850 7 -S180 Project A Project B -S400 $132 $132 $132 $132 S132 $132 so Formulas #N/A #N/A 2 1 Project NPV Calculations: 2 NPVA B 4 NPVE 5 Project IRR Calculations: 7 IRRA B IRR #N/A #N/A #N/A 0 $300 1 -$387 2 -$193 3 -$100 4 $600 5 S600 6 $850 7 -$180 Project MIRR Calculations: 2 MIRRA 3 4 Alternatively, MIRR, can be calculated as: 5 Project A 7 PV of Year 1 Outflow e PV of Year 2 Outflow PV of Year 3 Outflow 1 PV of Year 7 Outflow 2 B Formulas #N/A #N/A #N/A #A #N/A Formulas #N/A #N/A #N/A FV of Year 6 Inflow at Year 7 FV of Year 5 Inflow at Year 7 FV of Year 4 Inflow at Year 7 #N/A #N/A Sum of Inflow FVs Formulas 5 6 Sum of Outflow PVS 7 BN PV PMT 1 FV 2 IYR - MIRRA 3 7 $0.00 0 $0.00 #N/A 4 MIRRE #N/A 5 0 -S400 1 $132 2 $132 3 S132 4 4 $132 5 S132 6 $132 7 SO $ Formulas #N/A #N/A #N/A #N/A #/ #N/A #N/A 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 FV of Year 2 Inflow at Year 7 FV of Year 1 Inflow at Year 7 #NIA #N/A Sum of Inflow FVs Formulas 7 $0.00 0 0 $0.00 #N/A 46 Alternatively, MIRR, 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 I/YR - MIRRO 65 66 Project Acceptance: 67 WACC 68 Accept 69 70 WACC 71 NPVA 72 NPVE 73 Accept 74 75 NPV Profiles: 76 Discount Rates 77 78 0% 79 5.00% 80 10.00% 81 12.00% 82 15.00% 83 18.10% 84 23.86% 85 86 87 $ $1.20 13.00% #N/A 18.00% $2.66 $61.68 #N/A NPVA Discount Rates NPVA NPVE %9BnBma888889 NPV, S61.68 $2.66 S2.66 $61.68 0% 5.00% 10.00% 12.00% 15.00% 18.10% 23.86% #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A NPV Profiles 90 91 $1.00 NPV Profiles 85 36 37 38 $1.20 89 30 $1.00 21 22 $0.80 23 34 $0.60 95 36 $0.40 7 8 $0.20 99 00 $0.00 01 0% 5.00% 02 03 04 Calculation of Crossover Rate: 05 06 Project A 07 08 Project B 09 10 Project Delta 11 12 13 Crossover Rate = IRR. 14 15 Project MIRR Calculations at WACC = 18% = 16 WACC 17 10.00% 12.00% 15.00% 18.10% 23.86% 2 4 0 -S300 1 -S387 3 -$100 5 S600 6 $850 7 -S180 -S193 $600 -S400 $132 $132 $132 $132 S132 $132 SO WNIA ANIA #N/A #N/A #N/A #N/A ANIA #N/A 18.00% 18 MIRRA 19 MIRRS #N/A #N/A /A 20 21 22 23 24 25 26