A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 1 5 6. Project -$300 -$387 -$193 -$100 $600 $600 $850 -$180 A Project -$400 $131 $131 $131 $131 $131 $131 $0 B a. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ 162.48 Project B: $ 123.68 b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: 18.10 % Project B: 23.54 % c. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places. Project A: 15.60 % Project B: 17.43 % d. From your answers to parts a-c, which project would be selected? -Select- If the WACC was 18%, which project would be selected? -Select- e. Construct NPV profiles for Projects A and B. If an amount is zero, enter 0. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest o Discount Rate NPV Project A NPV Project B 0% %24 24

A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 1 5 6. Project -$300 -$387 -$193 -$100 $600 $600 $850 -$180 A Project -$400 $131 $131 $131 $131 $131 $131 $0 B a. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ 162.48 Project B: $ 123.68 b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: 18.10 % Project B: 23.54 % c. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places. Project A: 15.60 % Project B: 17.43 % d. From your answers to parts a-c, which project would be selected? -Select- If the WACC was 18%, which project would be selected? -Select- e. Construct NPV profiles for Projects A and B. If an amount is zero, enter 0. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest o Discount Rate NPV Project A NPV Project B 0% %24 24

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 11P

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