A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2 3 4 5 6 7 Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$405 $132 $132 $132 $132 $132 $132 $0 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. Project A: $ fill in the blank 2 Project B: $ fill in the blank 3 What is each project's IRR? Round your answer to two decimal places. Project A: fill in the blank 4% Project B: fill in the blank 5% What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations. Project A: fill in the blank 6% Project B: fill in the blank 7%
A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2 3 4 5 6 7 Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$405 $132 $132 $132 $132 $132 $132 $0 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. Project A: $ fill in the blank 2 Project B: $ fill in the blank 3 What is each project's IRR? Round your answer to two decimal places. Project A: fill in the blank 4% Project B: fill in the blank 5% What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations. Project A: fill in the blank 6% Project B: fill in the blank 7%
Chapter8: Budgets And Bank Reconciliations
Section: Chapter Questions
Problem 3.6C
Related questions
Question
A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
| 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| Project A | -$300 | -$387 | -$193 | -$100 | $600 | $600 | $850 | -$180 |
| Project B | -$405 | $132 | $132 | $132 | $132 | $132 | $132 | $0 |
The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.
-
What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
Project A: $ fill in the blank 2
Project B: $ fill in the blank 3
-
What is each project's IRR? Round your answer to two decimal places.
Project A: fill in the blank 4%
Project B: fill in the blank 5%
-
What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations.
Project A: fill in the blank 6%
Project B: fill in the blank 7%
-
From your answers to parts a-c, which project would be selected?
If the WACC was 18%, which project would be selected?
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Construct NPV profiles for Projects A and B. Round your answers to the nearest cent. Do not round your intermediate calculations. Negative value should be indicated by a minus sign.
Discount Rate NPV Project A NPV Project B 0% $ fill in the blank 10 $ fill in the blank 11 5 $ fill in the blank 12 $ fill in the blank 13 10 $ fill in the blank 14 $ fill in the blank 15 12 $ fill in the blank 16 $ fill in the blank 17 15 $ fill in the blank 18 $ fill in the blank 19 18.1 $ fill in the blank 20 $ fill in the blank 21 23.33 $ fill in the blank 22 $ fill in the blank 23 -
Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.
fill in the blank 24%
-
What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations.
Project A: fill in the blank 25%
Project B: fill in the blank 26%
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Project A
Project B
Grades for Freasia Frink: Managerial Fina...
NPVB
A
Capital budgeting criteria
WACC
IRRB
<>
template Saved ✓
Project NPV Calculations:
NPVA
Project IRR Calculations:
IRRA
Home Insert Draw
Project MIRR Calculations:
MIRRA
Alternatively, MIRRA can be calculated as:
Project A
PV of Year
PV of Year
PV of Year 3 Outflow
PV of Year 7 Outflow
MIRRB
Outflow
Outflow
N
PV
PMT
FV
I/YR MIRRA
Sum of Outflow PVs
Alternatively, MIRRB can be calculated as:
Project B
N
PV
PMT
FV
I/YR = MIRRB
Sum of Outflow PVs
Project Acceptance:
WACC
Arial
Sheet1
Workbook Statistics
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12.00%
+
7
$0.00
0
$0.00
7
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$0.00
12.00%
0
-$300
#N/A
-$405
Page Layout
#N/A
#N/A
#N/A
#N/A
0
-$300
#N/A
с
0
-$405
V 10
1
-$387
$132
Formulas
#N/A
Formulas
1
-$387
#N/A
D
1
$132
Formulas
2
-$193
$132
E
2
-$193
2
$132
C MindTap - Cengage Learning
Formulas Data
B
3
-$100
$132
3
-$100
3
$132
F
4
$600
$132
4
$600
4
$132
G
Review
V
Search for tools, help, and more (Option + Q)
5
$600
$132
5
$600
5
$132
H
View
ab
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$850
$132
6
$850
Help
6
$132
7
-$180
$0
C Excel Online Student Work
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$0
ng.cengage.com
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7
-$180
General
K
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#N/A
#N/A
#N/A
#N/A
Formulas
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
FV of Year 6 Inflow at Year 7
FV of Year 5 Inflow at Year 7
FV of Year 4 Inflow at Year 7
Sum of Inflow FVs
FV of Year 6 Inflow at Year 7
FV of Year 5 Inflow at Year 7
FV of Year 4 Inflow at Year 7
FV of Year 3 Inflow at Year 7
FV of Year 2 Inflow at Year 7
FV of Year 1 Inflow at Year 7
Sum of Inflow FVs
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$1.20
NPV Profiles:
Discount Rates
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
0%
<>
template Saved ✓
Home Insert Draw
Project A
Project B
Project Delta
MIRRA
MIRRB
A
Calculation of Crossover Rate:
Crossover Rate = IRRA
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116 WACC
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118
5.00%
Arial
0%
5.00%
10.00%
12.00%
Workbook Statistics
15.00%
18.10%
23.33%
fx
B
NPVA
10.00%
Sheet1 +
12.00%
18.00%
$2.66
$56.68
$2.66
18.00%
Page Layout
#N/A
C
#N/A
NPVB
V 10
0
-$300
-$405
#N/A
NPV Profiles
#N/A
#N/A
#N/A
$56.68
12.00%
D
1
-$387
$132
#N/A
2
-$193
$132
#N/A
E
C MindTap - Cengage Learning
Formulas Data
B
Discount Rates
15.00%
3
-$100
$132
F
#N/A
0%
5.00%
10.00%
12.00%
15.00%
18.10%
23.33%
18.10%
4
$600
$132
#N/A
G
NPVA
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
Review
V
$2.66
23.33%
Search for tools, help, and more (Option + Q)
5
$600
$132
#N/A
H
NPVB
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
View
$56.68
ab
6
$850
$132
Help
#N/A
C Excel Online Student Work
→
-$180
$0
ng.cengage.com
#N/A
General
K
V
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←0
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N
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→.0
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Q
R
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Σ✓ ✓ Ov
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:
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Excel Online Student Work.html
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Give Feedback to Microsoft
AB
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Comments
AC
T
AD
AE
50% +
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