Given the information above, I need to answer the following questions, but i don't understand them:

a. If the two projects are mutually exclusive, which project(s) should be chosen if the WACC is 10%? 5%? 15%?

b. If the payback was the only method a firm used to accept or reject projects, in your opinion how would you determine what is a "good" payback period?

c. What's the difference between IRR and the MIRR, and which generally gives a better idea of the rate of return on the investment in a project? Explain.

D. Why do most academics regard the NPV as being the single best criterion and better than the IRR? Why do companies still calculate the IRRs?

Solution a. Calculation of NPV, IRR, MIRR, Regular Payback and Discounted Payback 1 4 A B C D E F G H Year Project A Project B FVIF @ 10% Cum CF Cum CF Disc. Cum CF Disc. Cum CF of Project Alof Project Bl of Project A of Project B 0 (530) (530) 1 (530) (530) (530) (530) 1 $5 $20 1.1 (S25) ($10) ($25.45) ($11.82) $10 $10 1.21 ($15) SO ($17.19) ($3.55) 3 $15 $ 8 1 .331 SO S8 ($5.92) $2.46 $20 S6 1.4641 $20 $14 $7.74 $6.55 Net Present Value (NPV) (in million) Internal Rate of Return (IRR) Modified Rate of Return (MIRR) Regular Payback Period Discounted Payback Period I PV of Project A (530) $4.55 SS 26 $11.27 $13.66 $7.74 19.19% 16.50% 3.00 3.43 J PV of Project B (530) $18.18 $8 26 $6.01 $4.10 S6.55 22.52% 15.57% 2.00 2.59 1 3 4 3 A B C D E F Year Project A Project B FVIF @ 10% Cum CF Cum CF Disc. Cum CF Disc. Cum CF lor Project Alof Project Bl of Project of Proiect B 0 (530) (530) =(1+10/A3 =B31 EC3 =13 C3D3 1 $ $20 (1+10%/A4 =E3+B4 =F3+C4 G3+14 =H3+J4 2 S10 S10 =(1+10/A3 =B4-B5F4+C51 G4+5 =H4+5 S13 S8 (+10 A6 E3-B6 F 5-C6 GS+16 =HS+J6 4 S20 S6 / (1+10% A7 =56+B7 F 6+C7 G6+17 H6+7 Net Present Value (NPV (in million) Internal Rate of Return (IRR) Modified Rate of Return ( MIRR) Regular Payback Period Discounted Payback Period PV of PV of Proiect Project B =B3D3 -C3D3 =B4 D4 =C4 D4 =BDS =CS DS =B6 D6 -C6D6 B7D7 C7D7 SUM(3:17) SUM(J3:J7 IRR(B3:37) IRR(C3:07) MIRR(B3:B7,10%,10%) MIRR(C3:C7,10% 10%) AS (ES/B6) A4 (F4CS) A6 (G6/17) AS (HSJ6)