Your division is considering two 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 after$-$tax cash flows $($in millions of dollars$)$:

Chapter $10$: The Basics of Capital Budgeting: Evaluating Cash Flows $401$

a$.$ What is the regular payback period for each of the projects?

b$.$ What is the discounted payback period for each of the projects?

c$.$ If the two projects are independent and the cost of capital is $10\%,$ which project

or projects should the firm undertake?

d$.$ If the two projects are mutually exclusive and the cost of capital is $5\%,$ which

project should the firm undertake?

e$.$ If the two projects are mutually exclusive and the cost of capital is $15\%,$ which

project should the firm undertake?

f$.$ What is the crossover rate?

g$.$ If the cost of capital is $10\%,$ what is the modified IRR $($MIRR$)$ of each project?