Question
A firm with a 14% WACC is evaluating to projects for this years capital budget. After-tax cash flows, including depreciation, are as follows: 0 1
A firm with a 14% WACC is evaluating to projects for this years capital budget. After-tax cash flows, including depreciation, are as follows:
|
| 0 | 1 | 2 | 3 | 4 | 5 |
| Project M | -30,000 | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 |
| Project N | -90,000 | 28,000 | 28,000 | 28,000 | 28,000 | 28,000
|
a. Calculate NPV, IRR, MIRR, payback, and discounted payback for each project.
b. Assuming the projects are independent, which one(s) would you recommend?
c. If the projects are mutually exclusive, which would you recommend?
d. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?
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Finance With Monte Carlo
Authors: Ronald W. Shonkwiler
2013th Edition
146148510X, 978-1461485100
