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 |
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: $ fill in the blank 2
Project B: $ fill in the blank
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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 %
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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: fill in the blank %
Project B: fill in the blank %
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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% $ 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 23.86 $ 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 %
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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: fill in the blank %
Project B: fill in the blank %
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Authors: Raghavendra Rau, Robert Wardrop, Luigi Zingales
1st Edition
3030651169, 978-3030651169
