Question
Payback, NPV, and MIRR Your division is considering two investment projects, each of which requires an up-front expenditure of $28 million. You estimate that the
Payback, NPV, and MIRR
Your division is considering two investment projects, each of which requires an up-front expenditure of $28 million. You estimate that the cost of capital is 11% 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 |
What is the regular payback period for each of the projects? Round your answers to two decimal places. Project A years Project B years
What is the discounted payback period for each of the projects? Round your answers to two decimal places. Project A years Project B years
If the two projects are independent and the cost of capital is 11%, which project or projects should the firm undertake?
If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake
If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
What is the crossover rate? Round your answer to two decimal places. %
If the cost of capital is 11%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places. Project A % Project B %
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