Insigne Corporation is considering two investment projects (projects A and project B) that are mutually exclusive. Project A requires an initial cash out flow of $10,000,000 today and Project B requires an initial cash out flow of $15,000,000 today. The expected end-of-year cash inflows of each project are given in the following table: Year Cash Inflow project A Cash Inflow project B 1 3,500,000 7,500,000 2 6,000,000 8,000,000 3 6,000,000 4,000,000 4 9,000,000 4,500,000 Weighted average cost of capital is 13% for both projects. What is the IRR of each project? What is the NPV of each project? What is MIRR of each project? What is payback of each project? Which project should Insigne Corporation take? Please explain why
Insigne Corporation is considering two investment projects (projects A and project B) that are mutually exclusive. Project A requires an initial cash out flow of $10,000,000 today and Project B requires an initial cash out flow of $15,000,000 today. The expected end-of-year cash inflows of each project are given in the following table: Year Cash Inflow project A Cash Inflow project B 1 3,500,000 7,500,000 2 6,000,000 8,000,000 3 6,000,000 4,000,000 4 9,000,000 4,500,000 Weighted average cost of capital is 13% for both projects. What is the IRR of each project? What is the NPV of each project? What is MIRR of each project? What is payback of each project? Which project should Insigne Corporation take? Please explain why
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...
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Insigne Corporation is considering two investment projects (projects A and project B) that are mutually exclusive. Project A requires an initial cash out flow of $10,000,000 today and Project B requires an initial cash out flow of $15,000,000 today. The expected end-of-year cash inflows of each project are given in the following table:
|
Year |
|
Cash Inflow project B |
|
1 |
3,500,000 |
7,500,000 |
|
2 |
6,000,000 |
8,000,000 |
|
3 |
6,000,000 |
4,000,000 |
|
4 |
9,000,000 |
4,500,000 |
Weighted average cost of capital is 13% for both projects.
- What is the
IRR of each project? - What is the
NPV of each project? - What is MIRR of each project?
- What is payback of each project?
Which project should Insigne Corporation take? Please explain why
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