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A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: A company has
A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 1 2 3 4 5 6 7 -$300 $600 $600 $850 Project A -$387 -$193 $100 -$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 0. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent e. Construct NPV profiles for Projects A and B. If an amount is zero, enter 0. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent NPV Project A NPV Project B Discount Rate 404.00 0% 890.00 5 540.09 280.14 283.34 183.60 10 12 200.41 150.93 15 92.96 107.12 18.1 -0.09 67.48 147.63 24.51 -0.02 f. Calculate the crossover rate where the two projects' NPVS are equal. Do not round intermediate calculations. Round your answer to two decimal places. 14.28 % g. What is each project's MIRR at a WACC of 18%? Do not round intermediate calculations. Round your answers to two decimal places Project A 18.05 % Project B 20.70 %Step by Step Solution
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