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 | $131 | $131 | $131 | $131 | $131 | $131 | $0 |
What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
Project A: $ fill in the blank
Project B: $ fill in the blank
What is each project's IRR? Round your answer to two decimal places.
Project A: fill in the blank
Project B: fill in the blank
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: fill in the blank
Project B: fill in the blank
From your answers to parts a-c, which project would be selected?
Project A or Project B
If the WACC was 18%, which project would be selected?
Project A or Project B
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% | $ fill in the blank | $ fill in the blank |
| 5 | $ fill in the blank | $ fill in the blank |
| 10 | $ fill in the blank | $ fill in the blank |
| 12 | $ fill in the blank | $ fill in the blank |
| 15 | $ fill in the blank | $ fill in the blank |
| 18.1 | $ fill in the blank | $ fill in the blank |
| 23.54 | $ fill in the blank | $ fill in the blank |
Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.
fill in the blank
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: fill in the blank
Project B: fill in the blank
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
6th Edition
0201538997, 978-0201538991
