Answered: Required: (Evaluate the projects using…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section: Chapter Questions

Problem 23SP: Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site....

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Only A i - iv

Hence, the weighted average cost of capital (WACC) : 0.0772 or 7.72%

Transcribed Image Text:Question 5 Based on the Weighted Average Cost of Capital calaulatedin question 4, Micron Industries decides, based on the risk profile of projects A and B, to use a required return of 15%. Youhave been tasked with evaluating the quantitative aspects of the projects, which are mutually exclusive. The projected cashflows of both projects are as follows: Project Yeas -2250000 -3750000 S00000 1000000 2 750000 2000000 800000 2000000 1400000 2000000 As noted above, the company has a required rate of return of 15%. The following PV factors are provided PV Factor Year (15%) 0.8G96 12 0.7562 0.6575 4 0.5718 Required: (Evaluate the projects using each of the following criteria, stating which project(s) Micron industries should choos e under each criteria andwhy: | Payback ii Discounted Payback ili Net Present Value Profitability Index IV. (b) Compute the Internal Rate of Return (IRR) for the ProjectA only given that it falls between 15% and 18%. The PV Factors for 18% are provided below

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