Question 2: Capital Budgeting You are considering an investment in two projects, A and B. Both have an initial cost of $65,000, and the project cash flows listed below. Year 0 Project A Project B $ (65,000.00 $ (65,000.00) $ 4,000.00 $ 34,000.00 $ 13,000.00 $ 28,000.00 $ 30,000.00 $ 18,000.00 $ 35,000.00 $13,000.00 $ 40,000.00 $ 11,000.00 3 4 5 Assuming the welghted average cost of capital (WACC) is 12%, calculate the payback period, discounted payback period, NPV, and IRR. If the projects are mutually exclusive, which should be selected? WACC 12% Project A Project B Payback Period Discounted Payback Period Net Present Value Internal Rate of Return Best Project? Hint: Use an IF statement here 5 Suppose you are curious about how your WACC may impact your project decision. Create a NPV profile for Project A and B using the table below What is the exact crossover rate for these projects? Crossover Rate Project A Project B WACC 0.0% 1.5% 3.0% 4.5% 6.0% 7.5% 9.0% 10.5% 12.0% 13.5% 15.0% 16.5% 18.0% 19.5% 21.0% 22.5%