eBook Problem Walk-Through

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 $131 $131 $131 $131 $131 $131 $0

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

23.54

Calculate the crossover rate where the two projects' NPVs are equal. Do not round intermediate calculations. Round your answer to two decimal places.

%

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:

%