Question
Assume we have two projects being considered are mutually exclusive and have the following projected cash flows: Year Project A Cash flows Project B Cash
Assume we have two projects being considered are mutually exclusive and have the following projected cash flows:
Year Project A Cash flows Project B Cash flows
0 -$100,000 -100,000
1 31,250 0
2 31,250 0
3 31,250 0
4 31,250 0
5 31,250 200,254
Find the payback period of project A and B?
If the WACC of the two projects is 10 percent, which would be chosen (Show your calculation by using net present value (NPV)? Why?
Find internal rate of return (IRR) for project A and B? are the projects accepted or rejected? Why? IRRA
IRRB
Compute cross over rate between the two projects? Draw NPV profile and appoint the cross over rate (the intersect point between the two projects (NPVA = NPVB)?
Cross over rate
NPV
Discount rate or (IRR)
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