Payback, NPV, and MIRR

Your division is considering two investment projects, each of which requires an up-front expenditure of $23 million. You estimate that the cost of capital is 12% and that the investments will produce the following after-tax cash flows (in millions of dollars):

Year	Project A		Project B
1	5		20
2	10		10
3	15		8
4	20		6

1. What is the regular payback period for each of the projects? Round your answers to two decimal places.

   Project A: years

   Project B: years

2. What is the discounted payback period for each of the projects? Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: years

   Project B: years

3. If the two projects are independent and the cost of capital is 12%, which project or projects should the firm undertake?

   The firm should undertake -Select-Project AProject Bboth projectsItem 5 .

4. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?

   The firm should undertake -Select-Project AProject BItem 6 .

5. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?

   The firm should undertake -Select-Project AProject BItem 7 .

6. What is the crossover rate? Round your answer to two decimal places.

   %

7. If the cost of capital is 12%, what is the modified IRR (MIRR) of each project? Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: %

   Project B: %

   Payback, NPV, and MIRR

   Your division is considering two investment projects, each of which requires an up-front expenditure of $23 million. You estimate that the cost of capital is 12% and that the investments will produce the following after-tax cash flows (in millions of dollars):

   Year	Project A		Project B
   1	5		20
   2	10		10
   3	15		8
   4	20		6

8. What is the regular payback period for each of the projects? Round your answers to two decimal places.

   Project A: years

   Project B: years

9. What is the discounted payback period for each of the projects? Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: years

   Project B: years

10. If the two projects are independent and the cost of capital is 12%, which project or projects should the firm undertake?

    The firm should undertake -Select-Project AProject Bboth projectsItem 5 .

11. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?

    The firm should undertake -Select-Project AProject BItem 6 .

12. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?

    The firm should undertake -Select-Project AProject BItem 7 .

13. What is the crossover rate? Round your answer to two decimal places.

    %

14. If the cost of capital is 12%, what is the modified IRR (MIRR) of each project? Do not round intermediate calculations. Round your answers to two decimal places.

    Project A: %

    Project B: %