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 | -$405 | $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
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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: $
-
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: %
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From your answers to parts a-c, which project would be selected?
_________Project AProject B
If the WACC was 18%, which project would be selected?
_________Project AProject B
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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 $ $ 23.33 $ $ -
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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