Question
Your division is considering two projects. Its WACC is 10%, and the projects after-tax cash flows (in millions of dollars) would be as follows: Time
Your division is considering two projects. Its WACC is 10%, and the projects after-tax cash flows (in millions of dollars) would be as follows:
| Time | 0 | 1 | 2 | 3 | 4 |
| Project A | -$30 | $5 | $10 | $15 | $20 |
| Project B | -$30 | $20 | $10 | $8 | $6 |
a) Calculate the projects NPVs, IRRs, MIRRs, regular paybacks, and discounted paybacks.
b) If the two projects are independent, which project(s) should be chosen?
c) If the two projects are mutually exclusive and the WACC is 10%, which project(s) should be chosen?
d) Is it possible for conflicts to exist between the NPV and the IRR when independent projects are being evaluated? Explain your answer.
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Financial Markets And Corporate Strategy
Authors: David Hillier , Mark Grinblatt , Sheridan Titman
2nd Edition
0077129423,0077141350
