A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 1 3 4 5 7 Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$405 $133 $133 $133 $133 $133 $133 $0 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: $ Project B: $ b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: % 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

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
Problem 1PS
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A-G

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 cent.
Discount Rate
NPV Project A
NPV Project B
0%
10
12
15
18.1
23.65
f. Calculate the crossover rate where the two projects' NPVS are equal. Do not round intermediate calculations. Round your answer to two decimal
places.
%
g. What is each project's MIRR at a WACC of 18%? Do not round intermediate calculations. Round your answers to two decimal places.
Project A:
%
Project B:
%
Transcribed Image Text: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 cent. Discount Rate NPV Project A NPV Project B 0% 10 12 15 18.1 23.65 f. Calculate the crossover rate where the two projects' NPVS are equal. Do not round intermediate calculations. Round your answer to two decimal places. % g. What is each project's MIRR at a WACC of 18%? Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: %
A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
3
4
5
6
7
Project A
-$300
-$387
-$193
-$100
$600
$600
$850
-$180
Project B
-$405
$133
$133
$133
$133
$133
$133
$0
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: $
Project B: $
b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.
Project A:
Project B:
%
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:
%
Project B:
%
d. From your answers to parts a-c, which project would be selected?
Transcribed Image Text:A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 3 4 5 6 7 Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$405 $133 $133 $133 $133 $133 $133 $0 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: $ Project B: $ b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: % 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: % Project B: % d. From your answers to parts a-c, which project would be selected?
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