Question 5.

Having calculated the WACC in the previous question, use that number to calculate the answer There are three different projects that have been sent to you in the finance department. These projects have been deemed mutually exclusive, so after research you must decide which project that you should recommend to senior management.

Year Project A Project B Project C

0 (1,200) (8,000) (4,000)

1 725 3,500 1,000

2 350 2,000 800

3 200 2,000 1,700

4 100 2,000 1,700

5 500 2.500 1,700

WACC = 10%

What are the NPV and IRR for projects A, B, and C?

Project A: NPV: IRR:

Project B: NPV: IRR:

Project C: NPV: IRR:

Which project would you recommend and why?