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
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
Related questions
Question
Part D-G.
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:
1
2
3
4
5
7
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,
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 cent.
Discount Rate NPV Project A
NPV Project B
0%
$
5
10
12
15
18.1
23.54
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:
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