Excel Online Structured Activity: Capital budgeting criteria A company has a 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 0 1 1 2 3 3 4 5 6 7 + + -$300 Project Project B -$387 $132 -$193 $132 -$100 $132 $600 $132 $600 $132 $850 $132 -$180 $o -$400 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 What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. Project A: $ Project B: $ b. What is each project's IRR? Round your answer to two decimal places. Project A: % Project B: . ? : 7 ) c. 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: 9 Project B: d. From your answers to parts a-c, which project would be selected? If the WACC was 18%, which project would be selected? e. 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. NPV Project A NPV Project B Discount Rate 0% s $ 5 s $ 10 $ $ 12 $ $ 15 $ $ 18.1 $ $ $ 23.86 s $ f. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations. % Q. 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: Project B: Check My Work Reset Problem Capital budgeting criteria WACC 11.00% 0 -$300 1 -$387 2 $193 3 -$100 4 $600 5 $600 6 $850 Project A 7 -$180 Project B -$400 $132 S132 $132 $132 $132 S132 SO Formulas Project NPV Calculations: NPVA #N/A NPV: #N/A Project IRR Calculations: IRRA #N/A IRR. #N/A Project MIRR Calculations: MIRRA #N/A Alternatively, MIRRA can be calculated as: Project A 0 $300 1 -$387 2 -$193 4 $600 $100 5600 $850 -$180 PV of Year 1 Outflow PV of Year 2 Outflow PV of Year 3 Outflow PV of Year 7 Outflow Formulas #N/A #N/A #N/A #N/A Formulas #N/A #N/A #N/A FV of Year 6 Inflow at Year 7 FV of Year 5 Inflow at Year 7 FV of Year 4 Inflow at Year 7 Sum of Outflow PVS #N/A #N/A Sum of Inflow FVs N PV Formulas PMT 7 $0.00 0 $0.00 FV I/YR = MIRRA #N/A MIRR #N/A Alternatively, MIRRs can be calculated as: Project B 0 -$400 2 $132 3 $132 4 $132 5 $132 6 S132 7 $0 $132 Formulas #N/A #N/A #N/A #N/A #N/A #N/A FV of Year 6 Inflow at Year 7 FV of Year 5 Inflow at Year 7 FV of Year 4 Inflow at Year 7 FV of Year 3 Inflow at Year 7 FV of Year 2 Inflow at Year 7 FV of Year 1 Inflow at Year 7 Sum of Outflow PVs #N/A #N/A Sum of Inflow FVs Alternatively, MIRR8 can be calculated as: 0 -$400 1 $132 2 5132 3 $132 4 $132 5 $132 Project B 6 5132 7 SO Formulas #N/A #N/A #N/A #N/A #N/A #N/A FV of Year 6 Inflow at Year 7 FV of Year 5 Inflow at Year 7 FV of Year 4 Inflow at Year 7 FV of Year 3 Inflow at Year 7 FV of Year 2 Inflow at Year 7 FV of Year 1 Inflow at Year 7 Sum of Outflow PVs #N/A #N/A Sum of Inflow FVs Formulas N PV PMT FV I/YR = MIRR 7 $0.00 0 $0.00 #N/A Project Acceptance: WACC Accept 11.00% #N/A WACC NPVA NPV: Accept 18.00% $2.66 $61.68 #N/A NPV Profiles: Discount Rates NPVA Discount Rates NPV: $61.68 NPVA NPV $2.66 $2.66 $61.68 0% 5.00% 10.00% 0% 5.00% 10.00% 12.00% 15.00% 18.10% 23.86% 12.00% 15.00% 18.10% 23.86% #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A
