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You are considering 2 mutually exclusive projects, with the cash flows listed below. Assuming the company's weighted average cost of capital is 12%, calculate the
You are considering 2 mutually exclusive projects, with the cash flows listed below. Assuming the company's weighted average cost of capital is 12%, calculate the NPV and IRR of the two projects.
1. Which one should you accept?
2. Suppose you are unsure about your WACC calculation - at one discount rate are you indifferent between the two projects? At what discount rates do you prefer project A? Project B?
Project A | Project B | |
0 | (94,200) | (94,200) |
1 | 25,200 | 51,600 |
2 | 33,600 | 34,800 |
3 | 40,800 | 27,600 |
4 | 49,200 | 25,200 |
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