Question
Question 1. Bigg company is evaluating two projects for next years capital budget. The after-tax cash flows (including depreciation) for each project are the following:
Question 1.
Bigg company is evaluating two projects for next years capital budget. The after-tax cash flows (including depreciation) for each project are the following:
|
| Project A | Project B |
| Year 0 | -6,000 | -18,000 |
| Year 1 | 2,000 | 5,600 |
| Year 2 | 2,000 | 5,600 |
| Year 3 | 2,000 | 5,600 |
| Year 4 | 2,000 | 5,600 |
| Year 5 | 2,000 | 5,600 |
| Year 6 | 4,000 | 9,000 |
a.) If the companys WACC is 14%, find the NPV, IRR, payback, and discount payback for each project.
b.) If the projects are mutually exclusive, what is your recommendation to the company?
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Financial Management Principles And Practice
Authors: Timothy J. Gallagher, Joseph D. Andrew
3rd Edition
0131768824, 978-0131768826
