S B RWACC = x RS + x RB *(1 - TC) S+B S+ B = 0.3905 X 10.43% + 0.6095 X 8.07% (1-34%) = 7.319% 5. What are the net present value (NPV), internal rate of return (IRR), and Payback Periods for Projects A & B? Cumulative Cash Cumulative Cash Year Project A Flows Project B Flows 0 (5,000.00) (5,000.00) (5,000.00) (5,000.00) 1 (900.00) (5,900.00) 950.00 (4,050.00) 200.00 (5,700.00) 950.00 (3,100.00) 2 900.00 (4,800.00) 950.00 (2,150.00) 4 1,800.00 (3,000.00) 950.00 (1,200.00) 250.00 2,500.00 500.00 950.00 700.0 6 2,500.00 2,000.00 950.00 0 7 1,800.00 3.800.00 950.00 1,650.00 8 1,200.00 5,000.00 950.00 2,600.00 800.00 5,800.00 950.00 3,550.00 10 200.00 6,000.00 950.00 4,500.00 NPV = 1,634.16 1,219.47 IRR = 13.68% 13.77% PAYBACK PERIOD = 5.20 YEARS -- Project A 5.26 |YEARS -- Project B