A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 1 2 3 4 5 Project M -$15,000 $5,000 $5,000 $5,000 $5,000 $5,000 Project N -$45,000 $14,000 $14,000 $14,000 $14,000 $14,000 a. Calculate NPV for each project. Do not round intermediate calculations. Round your answers to the nearest cent. Project M: $ Project N: $ Calculate IRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: % % Calculate MIRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: % Project N: % Calculate payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: years years Calculate discounted payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: years years b. Assuming the projects are independent, which one(s) would you recommend? -Select- ✓ c. If the projects are mutually exclusive, which would you recommend? -Select- d. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR? -Select-
A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 1 2 3 4 5 Project M -$15,000 $5,000 $5,000 $5,000 $5,000 $5,000 Project N -$45,000 $14,000 $14,000 $14,000 $14,000 $14,000 a. Calculate NPV for each project. Do not round intermediate calculations. Round your answers to the nearest cent. Project M: $ Project N: $ Calculate IRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: % % Calculate MIRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: % Project N: % Calculate payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: years years Calculate discounted payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: years years b. Assuming the projects are independent, which one(s) would you recommend? -Select- ✓ c. If the projects are mutually exclusive, which would you recommend? -Select- d. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR? -Select-
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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Transcribed Image Text:A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:
1
2
3
4
5
Project M -$15,000 $5,000 $5,000 $5,000 $5,000 $5,000
Project N
-$45,000 $14,000 $14,000 $14,000 $14,000 $14,000
a. Calculate NPV for each project. Do not round intermediate calculations. Round your answers to the nearest cent.
Project M: $
Project N: $
Calculate IRR for each project. Do not round intermediate calculations. Round your answers to two decimal places.
Project M:
Project N:
%
%
Calculate MIRR for each project. Do not round intermediate calculations. Round your answers to two decimal places.
Project M:
%
Project N:
%
Calculate payback for each project. Do not round intermediate calculations. Round your answers to two decimal places.
Project M:
Project N:
years
years
Calculate discounted payback for each project. Do not round intermediate calculations. Round your answers to two decimal places.
Project M:
Project N:
years
years
b. Assuming the projects are independent, which one(s) would you recommend?
-Select-
✓
c. If the projects are mutually exclusive, which would you recommend?
-Select-
d. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?
-Select-
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