Question
Please show all work on excel: You just got hired by McKinsey & Company as a financial consultant and theyre paying you an egregious amount
Please show all work on excel:
You just got hired by McKinsey & Company as a financial consultant and theyre paying you an egregious amount of money. Accordingly, they have you working on the tough projects like this one
Consider the following two mutually exclusive projects available to the firm. Free cash flows for Projects A and B are provided below. Assume the two projects have essentially the same level of riskiness, and your prior analysis indicates that the appropriate risk-adjusted hurdle rate (i.e., the WACC) is 7.45% for both projects. Perform the analysis below and make a recommendation as to which project to pursue.
Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
Project A | -$3,200 | $700 | $700 | $700 | $700 | $700 | $700 |
Project B | -$600 | $58 | $58 | $695 |
I. Having performed this onslaught of financial analysis (demonstrating to your new colleagues that you are a finance ninja), assess your findings: which project do you recommend and why?
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