Question
A company has an 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2
A company has an 11% 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 | $134 | $134 | $134 | $134 | $134 | $134 | $0 | ||
Part A. 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.
Discount Rate | NPV Project A | NPV Project B |
0% | $ | $ |
5 | ||
10 | ||
12 | ||
15 | ||
18.1 | ||
24.51 |
B. Calculate the crossover rate where the two projects' NPVs are equal. Do not round intermediate calculations. Round your answer to two decimal places.
%
C. 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: %
Project B: %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started