A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 01234567 Project A-$300-$387-$193-$100$600$600$850-$180Project B-$405$132$132$132$132$132$132$0The 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 2Project B: $ fill in the blank 3What 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? 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 RateNPV Project ANPV Project B0%$ fill in the blank 10$ fill in the blank 115$ fill in the blank 12$ fill in the blank 1310$ fill in the blank 14$ fill in the blank 1512$ fill in the blank 16$ fill in the blank 1715$ fill in the blank 18$ fill in the blank 1918.1$ fill in the blank 20$ fill in the blank 2123.33$ 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% The image is an Excel spreadsheet focused on evaluating capital budgeting criteria for two projects, Project A and Project B. It involves calculations for various financial metrics such as Net Present Value (NPV), Internal Rate of Return (IRR), and Modified Internal Rate of Return (MIRR). ### Key Components:1. **WACC (Weighted Average Cost of Capital):** - Displays the WACC values, which are critical for discounting future cash flows. - Project A: 12.00%2. **Cash Flows:** - Project A and Project B have cash flow values listed for each year from Year 0 to Year 7. - Example for Project A: - Year 0: -$3,500 - Year 1 to Year 7: Range from $313 to $880 - Similar structure for Project B.3. **Project NPV Calculations:** - Involves a section where NPVs are calculated using the formula `=N/A` (indicating a placeholder for actual functions).4. **Project IRR Calculations:** - Provides space to calculate IRR for the projects, denoted by the `=N/A` formula.5. **Project MIRR Calculations:** - MIRR values are prepared for calculation in the sheet.6. **Detailed Calculation Breakdown:** - Shows how MRR can be calculated with detailed formulas for each year, involving inflows and outflows. - Each year’s inflows and outflows are given separate calculations.7. **Flow PVs (Present Values):** - Lists the summation formula for outflow and inflow present values to assess the net present value over time.8. **Project Acceptance Criteria:** - Displays the acceptance criteria for the project using values calculated in the sheet.9. **Visual Elements:** - Colored cells indicate where calculations and inputs should be made. - Arrows in colored cells likely indicate the direction of cash flows or where inputs need to be directed.This spreadsheet is a guide for students or professionals to calculate and evaluate capital budgeting projects using standard financial metrics and provides placeholders for inserting specific formulas to produce results. **Project Evaluation and NPV Analysis****Overview**This worksheet presents a financial analysis for project evaluation using Net Present Value (NPV) profiles and crossover rates to determine project feasibility. It addresses Project Acceptance, NPV Profiles, and the Calculation of Crossover Rates.**Project Acceptance**- **Required Rate of Return (WACC):** 18.00%- **NPVₐ:** $2.66- **NPVᴮ:** $505.68**NPV Profiles**- Discount rates range from 0% to 23.33%.- NPVs are shown for both Project A (NPVₐ) and Project B (NPVᴮ).**Chart: NPV Profiles**A line graph displays the NPVs of Project A and Project B against various discount rates. It's essential for visualizing how changes in discount rate affect the profitability of each project.**Calculation of Crossover Rate**The table includes cash flows for:- **Project A:** Initial cost $450, Year 1 $75, Year 2 $132, and additional future cash flows.- **Project B:** Initial cost $650, Year 1 $132, and further cash flows.This section helps to determine the rate at which the NPVs of two projects become equal.**Key Metrics**- **Crossover Rate:** Not explicitly stated.- **IRR and MIRR:** Calculations for the modified internal rate of return (MIRR) at a WACC of 18% are incomplete, with data marked as N/A.**Conclusion**This analysis assists in understanding project viability, especially under varying financial conditions. It emphasizes the importance of assessing different financial metrics to make informed investment decisions.

NPV (Net Present Value): NPV measures the difference between the present value of cash inflows and…

Answered: A company has a 12% WACC and is…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

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Question

A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:

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%
From your answers to parts a-c, which project would be selected?

If the WACC was 18%, which project would be selected?

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%

The image is an Excel spreadsheet focused on evaluating capital budgeting criteria for two projects, Project A and Project B. It involves calculations for various financial metrics such as Net Present Value (NPV), Internal Rate of Return (IRR), and Modified Internal Rate of Return (MIRR).

### Key Components:

1. **WACC (Weighted Average Cost of Capital):**
- Displays the WACC values, which are critical for discounting future cash flows.
- Project A: 12.00%

2. **Cash Flows:**
- Project A and Project B have cash flow values listed for each year from Year 0 to Year 7.
- Example for Project A:
- Year 0: -$3,500
- Year 1 to Year 7: Range from $313 to $880
- Similar structure for Project B.

3. **Project NPV Calculations:**
- Involves a section where NPVs are calculated using the formula `=N/A` (indicating a placeholder for actual functions).

4. **Project IRR Calculations:**
- Provides space to calculate IRR for the projects, denoted by the `=N/A` formula.

5. **Project MIRR Calculations:**
- MIRR values are prepared for calculation in the sheet.

6. **Detailed Calculation Breakdown:**
- Shows how MRR can be calculated with detailed formulas for each year, involving inflows and outflows.
- Each year’s inflows and outflows are given separate calculations.

7. **Flow PVs (Present Values):**
- Lists the summation formula for outflow and inflow present values to assess the net present value over time.

8. **Project Acceptance Criteria:**
- Displays the acceptance criteria for the project using values calculated in the sheet.

9. **Visual Elements:**
- Colored cells indicate where calculations and inputs should be made.
- Arrows in colored cells likely indicate the direction of cash flows or where inputs need to be directed.

This spreadsheet is a guide for students or professionals to calculate and evaluate capital budgeting projects using standard financial metrics and provides placeholders for inserting specific formulas to produce results.

**Project Evaluation and NPV Analysis**

**Overview**

This worksheet presents a financial analysis for project evaluation using Net Present Value (NPV) profiles and crossover rates to determine project feasibility. It addresses Project Acceptance, NPV Profiles, and the Calculation of Crossover Rates.

**Project Acceptance**
- **Required Rate of Return (WACC):** 18.00%
- **NPVₐ:** $2.66
- **NPVᴮ:** $505.68

**NPV Profiles**
- Discount rates range from 0% to 23.33%.
- NPVs are shown for both Project A (NPVₐ) and Project B (NPVᴮ).

**Chart: NPV Profiles**
A line graph displays the NPVs of Project A and Project B against various discount rates. It's essential for visualizing how changes in discount rate affect the profitability of each project.

**Calculation of Crossover Rate**
The table includes cash flows for:
- **Project A:** Initial cost $450, Year 1 $75, Year 2 $132, and additional future cash flows.
- **Project B:** Initial cost $650, Year 1 $132, and further cash flows.

This section helps to determine the rate at which the NPVs of two projects become equal.

**Key Metrics**
- **Crossover Rate:** Not explicitly stated.
- **IRR and MIRR:** Calculations for the modified internal rate of return (MIRR) at a WACC of 18% are incomplete, with data marked as N/A.

**Conclusion**
This analysis assists in understanding project viability, especially under varying financial conditions. It emphasizes the importance of assessing different financial metrics to make informed investment decisions.

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