Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

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

image text in transcribedimage text in transcribed

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 6 7 Project A Project B -$300 -$400 -$387 $134 - $193 $134 -$100 $134 $600 $134 $600 $134 $850 $134 -$180 $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 O. 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 O. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent. Discount Rate NPV Project B NPV Project A 890.00 404.00 540.09 280.14 183.60 283.34 200.41 150.93 107.12 67.48 -0.02 92.96 -0.09 -147.63 18.1 24.51 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

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions