Question
Year Project A Project B 1 10 30 2 15 30 3 25 10 4 30 10 Your division is considering two investment projects, each
Year | Project A | Project B |
1 | 10 | 30 |
2 | 15 | 30 |
3 | 25 | 10 |
4 | 30 | 10 |
Your division is considering two investment projects, each of which requires an up
-
fron
expenditure of $50 million. You
estimate the cost of capital to be 8% and that the investment will produce the following after
-
tax cash flows (in millions of
dollars).
a.
Calculate each projects payback, discounted payback, NPV, IRR, MIRR, and PI.
b.
If the projects were independent, which project(s) would you recommend based on these calculations?
c.
If the projects were mutually exclusive, which project would you recommend ba
sed on these calculations?
d.
How would your answers to (a), (b), and (c) change if the wacc were 1
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