Question
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
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 |
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What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
Project A $
Project B $
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What is each project's IRR? Round your answer 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.) Round your answer to two decimal places. Do not round your intermediate calculations.
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. 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 - Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations. %
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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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