Question
You are considering two mutually exclusive projects with the following cash flows: Project C/F0 C/F1 C/F2 C/F3 C/F4 C/F5 C/F6 A $(41,215) $12,500 $14,000 $16,500
You are considering two mutually exclusive projects with the following cash flows:
| Project | C/F0 | C/F1 | C/F2 | C/F3 | C/F4 | C/F5 | C/F6 |
| A | $(41,215) | $12,500 | $14,000 | $16,500 | $18,000 | $20,000 | N/A |
| B | $(46,775) | $15,000 | $15,000 | $15,000 | $15,000 | $15,000 | $15,000 |
A) Assuming that the discount rate for project A is 16% and the discount rate for B is 15%, then given that these are mutually exclusive projects, which project would you take and why?
B) If you are one of the management teams, when making a capital budgeting decision, how would you explain why the WACC is different for project A than for project B?
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The Value Investor's Handbook
Authors: Andrew P.C.
1st Edition
1098810449, 978-1098810443
