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 1 3 4 5 6 Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$400 $131 $131 $131 $131 $131 $131 $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. X Open spreadsheet a. 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. a. 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: 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: % 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? 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. Discount Rate NeV Project A NPV Prolect B 0% $ 5 10 12 15 18.1 23.54 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. Discount Rate NPV Project A NPV Project B 0% $ $ 5 10 $ $ 12 $ $ 15 $ 18.1 $ $ 23.54 $ $ 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 g. 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: 9% Project B: % WACC 1100% 0 1 Project A 3 $100 6 4 6 $850 $300 $387 $193 $600 7 7 $600 $18 8 Project B 9 $400 $131 $131 $131 $131 $131 $131 S0 10 11 Project NPV Calculations: 12 NPV Formulas leNA 13 14 NPV #NA 15 16 Project IRR Calculations: 17 IRR #NA 18 19 IRR #NIA 20 21 Project MIRR Calculations: MIRR ENA 24 Altematively. MIRR, can be calculated as: Sheet1 Help li 21 Project MIRR Calculations: 22 MIRR H ANA 23 24 Alternatively, MIRR, can be calculated as 25 2 $193 3 $100 26 Project A 27 28 PV of Year 1 Outlow 29 PV of Year 2 Outflow 30 PV of Year 3 Outflow 31 PV of Year 7 Outflow 32 6 S050 $300 $387 $600 $600 Formulas $180 ANIA #NA ANIA aNA 33 34 35 36 Sum of Outflow PVs ANIA 37 38 N 39 PV 40 PMT Formulas S0.00 0 S0 00 41 FV 42 YR MIRR aNA 43 44 MRR #NA 36 Sum of Outlow PVs ENIA 37 38 N 39 PV 40 PMT FV Formelas $0 00 0 S0 00 41 42YR MIRR sNA 43 44 MIRR aNA 45 46 Altematively, MIRR can be calculated as 47 1 4 4 Project B $400 $131 $131 $131 $131 $131 $131 50 49 $0 00 62 PMT 63 FV $0.00 64 YR MIRR NIA 65 66 Project Acceptance: 67 WACC 68 Accept 11.00% INIA 69 70 WACC 71 NPV 72 NPV 73 Accept 18 00 % $2 66 $58 19 ENIA 74 75 NPV Profiles: 76 Discount Rates NPV NPV $58 19 Discount Rates NPV NPV 77 $2 66 $2 66 $58 78 0% 0% 5.00% 10 00% 12.00% 15.00% #NA ANIA eNA 79 5.00% 10.00% 12.00% 15.00% 18.10 % 23.54 % ENA 80 ANIA #NA 81 #NA #NA 82 #NA #NA #NA #NA 18 10 % 84 2354% ENA #NA 85 86 87 NPV Profiles $1.20 89 90 91 S1.00 50.80 93 94 Sa.60 95 96 97 S0.40 98 50.20 99 100 S0.00 101 102 103 104 Calculation of Crossover Rate: 5.00% 10.00% 12.00% 15.00% 18.10 % 2154% 105 4 106 Project A 107 5 $600 4300 $387 $193 $100 $600 $850 $180 108 Project B 109 $400 $131 $131 $131 $131 $131 $131 $0 sUS 104 Calculation of Crossover Rate: Di 105 106 Project A 0 $300 2 $193 107 $387 $100 $600 S600 $850 $180 108 Project B $400 $131 $131 $131 $131 109 $131 $131 110 Project Deta 111 NA #NA NA #NA 112 NA ANA ANA ANIA 113 Crossover Rate IRR ENA 114 115 Project MIRR Calculations at WACC-18 % 116 WACC 18 00% 117 118 MIRR 119 MIRR 120 #NA NA 121 122 123
