Excel Online Structured Activity: Capital budgeting criteria

A company has a 12% 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	-$405	$134	$134	$134	$134	$134	$134	$0

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

1. What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

   Project A: $ fill in the blank 2

   Project B: $ fill in the blank 3

2. What is each project's IRR? Round your answer to two decimal places.

   Project A: fill in the blank 4%

   Project B: fill in the blank 5%

3. 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: fill in the blank 6%

   Project B: fill in the blank 7%

4. From your answers to parts a-c, which project would be selected?

   _________Project AProject B

   If the WACC was 18%, which project would be selected?

   _________Project AProject B

6. 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.

   Discount Rate	NPV Project A	NPV Project B
   0%	$ fill in the blank 10	$ fill in the blank 11
   5	$ fill in the blank 12	$ fill in the blank 13
   10	$ fill in the blank 14	$ fill in the blank 15
   12	$ fill in the blank 16	$ fill in the blank 17
   15	$ fill in the blank 18	$ fill in the blank 19
   18.1	$ fill in the blank 20	$ fill in the blank 21
   23.97	$ fill in the blank 22	$ fill in the blank 23

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

   fill in the blank 24%

8. 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: fill in the blank 25%

   Project B: fill in the blank 26%