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You work for a venture capital investment firm. You are given a task to analyze two potential investment projects, each of which requires an up-front
You work for a venture capital investment firm. You are given a task to analyze two potential investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 10% and that the investments will produce the following future after-tax cash flows (in millions of dollars): a. Calculate the NPV and IRR for each project. b. Calculate the regular payback period for each of the projects. c. Calculate the discounted payback period for each of the projects. d. Calculate the crossover rate. e. Calculate the modified IRR of each project. f. If the two projects are mutually exclusive, which project would you recommend? Your discussion should be based on the measures you calculated in parts a. e. You work for a venture capital investment firm. You are given a task to analyze two potential investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 10% and that the investments will produce the following future after-tax cash flows (in millions of dollars): a. Calculate the NPV and IRR for each project. b. Calculate the regular payback period for each of the projects. c. Calculate the discounted payback period for each of the projects. d. Calculate the crossover rate. e. Calculate the modified IRR of each project. f. If the two projects are mutually exclusive, which project would you recommend? Your discussion should be based on the measures you calculated in parts a. e
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