A company is analyzing two mutually exclusive projects, S and L, with the following cash flows:| Year | Project S | Project L ||------|-----------|-----------|| 0 | -$1,000 | -$1,000 || 1 | $886.11 | $10 || 2 | $260 | $260 || 3 | $5 | $380 || 4 | $10 | $805.42 |The company’s WACC (Weighted Average Cost of Capital) is 10.5%. What is the IRR (Internal Rate of Return) of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places.[Answer Box] ___ %

We will compute the NPV of the two projects. The better project is the one with the higher NPV.

Answered: A company is analyzing two mutually…

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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Union pacific is considering a project that has the following cash flow and WACC data. What is the projects MIRR? Note that a projects MIRR can be less than the WACC (and negative), in which case be rejected. WACC: 9.50% Year 0 1 2 3 Cash flows -1,000, 450, 450, 450
A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 1 2 3 4 Project S -$1,000 $875.31 $260 $15 $5 Project L -$1,000 $5 $240 $400 $813.71 The company's WACC is 9.5%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places. %
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