Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your division is considering two projects with the following cash flows (in millions): 0 1 2 3 Project A -$19 $8 $15 $17 Project B

Your division is considering two projects with the following cash flows (in millions):

0 1 2 3
Project A -$19 $8 $15 $17
Project B -$17 $11 $8 $6
  1. What are the projects' NPVs assuming the WACC is 5%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places.

    Project A: $ million

    Project B: $ million

    What are the projects' NPVs assuming the WACC is 10%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places.

    Project A: $ million

    Project B: $ million

    What are the projects' NPVs assuming the WACC is 15%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places.

    Project A: $ million

    Project B: $ million

  2. What are the projects' IRRs assuming the WACC is 5%? Do not round intermediate calculations. Round your answer to two decimal places.

    Project A: %

    Project B: %

    What are the projects' IRRs assuming the WACC is 10%? Do not round intermediate calculations. Round your answer to two decimal places.

    Project A: %

    Project B: %

    What are the projects' IRRs assuming the WACC is 15%? Do not round intermediate calculations. Round your answer to two decimal places.

    Project A: %

    Project B: %

  3. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 89.04%.)

    If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 89.04%.)

    If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 89.04%.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Raising Venture Capital

Authors: Rupert Pearce, Simon Barnes

1st Edition

0470027576, 978-0470027578

More Books

Students also viewed these Finance questions

Question

Compare levels of resolution in conflict outcomes?

Answered: 1 week ago

Question

Strategies for Managing Conflict Conflict Outcomes?

Answered: 1 week ago