The Basics of Capital Budgeting Your division is considering two projects with the following cash flows (in millions): 0 1 2 3 Project A -$31 $7 $12 $22 Project B -$19 $13 $6 $5 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: $___ million

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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The Basics of Capital Budgeting

Your division is considering two projects with the following cash flows (in millions):

 

0

1

2

3

 

         
         

 

Project A

-$31

$7

$12

$22

Project B

-$19

$13

$6

$5

  1. 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:    $___   million

Project B:    $___   million

 

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:  $___   million

Project B:  $___   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:  $___   million

Project B:  $___   million

 

  1. 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:   ___ %

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:   ___ %

What are the projects' IRRs assuming the WACC is 15%? Do not round intermediate calculations. Round your answer to two decimal places.

Project A:   ___ %

Project B:   ___ %

 

  1. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 10.72%.)

-Select-Project A or Project B or Neither A nor B

If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 10.72%.)

-Select-Project A or Project B or Neither A nor B

If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 10.72%.)

-Select-Project A or Project B or Neither A nor B

 

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