ROUND ANSWERS TO 2 DECIMAL PLACES

Cash Flows generated (in million of dollars). These are mutually exclusive projects.

--------CASH FLOWS-----------

Year Project A Project B

0 -300 -415

1 -390 135

2 -190 135

3 -100 135

4 600 135

5 600 135

6 860 135

7 -180 0

Use financial calculator for practice:

ACalculate the IRR and the multiple NPVs (when discount rate is 10%, 13% and 17%) for each project.

Project A Project B

NPV (at 10% = WACC): ____

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NPV (at 13% = WACC): _____

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NPV (at 17% = WACC): _____

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IRR (%): ____

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Which project will you invest in, considering NPV and IRR if the WACC is 17%? ____

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