CAPITAL BUDGETING CRITERIA 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 3 4 5 Project M Project N -$30,000 -$90,000 + $10,000 $28,000 + $10,000 $28,000 + $10,000 $28,000 $10,000 $28,000 $10,000 $28,000 a. Calculate NPV, IRR, MIRR, payback, and tistountedprvk for each project. b. Assuming the projects are independent, which one(s) would you recommend?
CAPITAL BUDGETING CRITERIA 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 3 4 5 Project M Project N -$30,000 -$90,000 + $10,000 $28,000 + $10,000 $28,000 + $10,000 $28,000 $10,000 $28,000 $10,000 $28,000 a. Calculate NPV, IRR, MIRR, payback, and tistountedprvk for each project. b. Assuming the projects are independent, which one(s) would you recommend?
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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Please show the solution on excel spreadsheet and please indicate the formulas used. Thank you.
Transcribed Image Text:**11-7 CAPITAL BUDGETING CRITERIA**
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:
**Year:**
- **0**
- **1**
- **2**
- **3**
- **4**
- **5**
**Project M:**
- Year 0: \(-\$30,000\)
- Year 1: \$10,000
- Year 2: \$10,000
- Year 3: \$10,000
- Year 4: \$10,000
- Year 5: \$10,000
**Project N:**
- Year 0: \(-\$90,000\)
- Year 1: \$28,000
- Year 2: \$28,000
- Year 3: \$28,000
- Year 4: \$28,000
- Year 5: \$28,000
a. Calculate NPV, IRR, MIRR, payback, and discounted payback for each project.
b. Assuming the projects are independent, which one(s) would you recommend?
*Note: You can use an Excel formula for calculating npv, irr, mirr.*
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