Problem 10-21 (Payback, NPV, and MIRR)

Payback, NPV, and MIRR Your division is considering two investment projects, each of which requires an up-front expenditure of $25 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 ProjectA Project B 1 5 20 2 10 10 3 15 8 4 20 6 a. What is the regular payback period for each of the projects? Round your answers to two decimal places. Project A: years Project B: years b. 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 c. If the two projects are independent and the cost of capital is 11%, which project or projects should the rm undertake? The firm should undertake -Select v . d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? The firm should undertake . e. If the two projects are mutuallyggggiugive and the cost of capital is 15%, which project should the rm undertake? The firm should undertake-E. f. What is the crossover rate? Round your answer to two decimal places. % g. If the cost of capital is 11%, what is the modied IRR (MIRR) of each project? Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: %