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 B
Transcribed Image Text:Your division is considering two projects with the following cash flows (in millions):
2
3
Project
-$31
$7
$12
$22
A
Project
-$19
$13
$6
$5
B
a. What are the projects' NPVS assuming the WACC is 5%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do
not round intermediate calculations. Round your answer to two decimal places.
Project A: $ 5.56
O million
Project B: $ 3.14
What are the projects' NPVS assuming the WACC is 10%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do
not round intermediate calculations. Round your answer to two decimal places.
Project A: $ 1.81 O million
Project B: $ 1.53 O million
What are the projects' NPVS assuming the WACC is 15%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do
not round intermediate calculations. Round your answer to two decimal places.
Project A: $ -1.3: O million
Project B: $ 0.13 O million
b. What are the projects' IRRS assuming the WACC is 5%? Do not round intermediate calculations. Round your answer to two decimal places.
Project A:
Project B:
10 0 %
What are the projects' IRRS assuming the WACC is 10%? Do not round intermediate calculations. Round your answer to two decimal places.
Project A:
Project B:
5
What are the projects' IRRS assuming the WACC is 15%? Do not round intermediate calculations. Round your answer to two decimal places.
Project A:
-2 0 %
Project B:
c. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 10.72%.)
Project A
If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 10.72%.)
Project A
If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 10.72%.)
Project B
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