A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including yearly depreciation, are as follows: Project M -$6,000 $2,000 $2,000 $2,000 $2,000 $2,000 Project N -$18,000 $5,600 $5,600 $5,600 $5,600 $5,600   Calculate discounted payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M:      years Project N:      years

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including yearly depreciation, are as follows:

Project M -$6,000 $2,000 $2,000 $2,000 $2,000 $2,000
Project N -$18,000 $5,600 $5,600 $5,600 $5,600 $5,600

 

Calculate discounted payback for each project. Do not round intermediate calculations. Round your answers to two decimal places.

Project M:      years

Project N:      years

 

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so i also got that solution but it say it was wrong... i sent my professor the question as well because I dont know how I keep getting 4.24 and cengage says its wrong. By pure luck I typed 4.42 and it says thats right!!! how can that be?

**Capital Budget Evaluation: Project Analysis**

WACC is evaluating two projects for this year's capital budget. The analysis includes after-tax cash flows, with depreciation considered. The projects are named Project M and Project N. 

### Cash Flow Details

1. **Project M:**
   - Initial investment: ($6,000.00)
   - Cash flows over five years: $2,000 each year

2. **Project N:**
   - Initial investment: ($18,000.00)
   - Cash flows over five years: $5,600 each year

### Calculation Metrics

**Net Present Value (NPV):**
- Project M: $1,034.46
- Project N: $1,696.50

**Internal Rate of Return (IRR):**
- Project M: 19.86%
- Project N: 18.80%

**Modified Internal Rate of Return (MIRR):**
- Project M: 16.65%
- Project N: 15.05%

**Payback Period:**
- Project M: 3.00 years
- Project N: 3.21 years

**Discounted Payback Period:**
- Project M: 4.03 years
- Project N: 4.24 years

*Note: There is a discrepancy noted in the assignment regarding the discounted payback for Project N.*

### Data Presentation

The data is organized in a table format with columns representing years 0 to 5 and rows detailing cash flows, present value of cash flows, and balance calculations for both projects. The specified WACC for analysis is 13%.

This detailed computation helps in assessing the viability and profitability of the projects based on several financial metrics.
Transcribed Image Text:**Capital Budget Evaluation: Project Analysis** WACC is evaluating two projects for this year's capital budget. The analysis includes after-tax cash flows, with depreciation considered. The projects are named Project M and Project N. ### Cash Flow Details 1. **Project M:** - Initial investment: ($6,000.00) - Cash flows over five years: $2,000 each year 2. **Project N:** - Initial investment: ($18,000.00) - Cash flows over five years: $5,600 each year ### Calculation Metrics **Net Present Value (NPV):** - Project M: $1,034.46 - Project N: $1,696.50 **Internal Rate of Return (IRR):** - Project M: 19.86% - Project N: 18.80% **Modified Internal Rate of Return (MIRR):** - Project M: 16.65% - Project N: 15.05% **Payback Period:** - Project M: 3.00 years - Project N: 3.21 years **Discounted Payback Period:** - Project M: 4.03 years - Project N: 4.24 years *Note: There is a discrepancy noted in the assignment regarding the discounted payback for Project N.* ### Data Presentation The data is organized in a table format with columns representing years 0 to 5 and rows detailing cash flows, present value of cash flows, and balance calculations for both projects. The specified WACC for analysis is 13%. This detailed computation helps in assessing the viability and profitability of the projects based on several financial metrics.
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