Your division is considering two projects with the following cash flows (in mill
ID: 1175748 • Letter: Y
Question
Your division is considering two projects with the following cash flows (in millions): Project A $29 Project B $16 $15 $13 $3 3 $6 a. what are the propects' NPVs assuming the wac 's 5%? Round your answer to two decimal places. Enter your answer n m bons. For example, an answer of sesso ooo should be entered as 10.55 Project A $ -10.63 milion Project B 7.56 million What are the projects' NPVs a should be entered as 10.55. Project A s Project B what are the projects' NPVs assuming the WACC is 15%? Round your answer to two door al places. Enter your answer in milions. For example, an answer of $10,550,000 should be entered as 10.55 Project A Project B$ ssuming the WACC is 10%? Round your answer to two deornal places. Enter your answer lions. For example, an answer of $10,550,000 million million million million b. what are the projects' IRRs assuming the waccis 5%? Round your answer to two decmal places. Project A Project B what are the projects! RRs assuming the wacc is 10%? Round your answer to two decimal places: Project A '
Explanation / Answer
A
Project A
project B
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 5%
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 5%
0
-29
-29
0
-16
-16
1
15
14.28571
1
8
7.619048
2
13
11.79138
2
3
2.721088
3
3
2.591513
3
6
5.183026
NPV
sum of present value of cash flow
-0.33139
NPV
sum of present value of cash flow
-0.47684
Project A
project B
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 10%
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 10%
0
-29
-29
0
-16
-16
1
15
13.63636
1
8
7.272727
2
13
10.7438
2
3
2.479339
3
3
2.253944
3
6
4.507889
NPV
sum of present value of cash flow
-2.36589
NPV
sum of present value of cash flow
-1.74005
Project A
project B
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 15%
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 15%
0
-29
-29
0
-16
-16
1
15
13.04348
1
8
6.956522
2
13
9.829868
2
3
2.268431
3
3
1.972549
3
6
3.945097
NPV
sum of present value of cash flow
-4.15411
NPV
sum of present value of cash flow
-2.82995
B-
Project A
WACC -5%
project B
WACC -5%
Year
cash flow
Year
cash flow
0
-29
0
-16
1
15
1
8
2
13
2
3
3
3
3
6
IRR = Using IRR function in MS excel
4.25%
IRR = Using IRR function in MS excel
3.30%
Project A
WACC -10%
project B
WACC -10%
Year
cash flow
Year
cash flow
0
-29
0
-16
1
15
1
8
2
13
2
3
3
3
3
6
IRR = Using IRR function in MS excel
4.25%
IRR = Using IRR function in MS excel
3.30%
Project A
WACC -15%
project B
WACC -15%
Year
cash flow
Year
cash flow
0
-29
0
-16
1
15
1
8
2
13
2
3
3
3
3
6
IRR = Using IRR function in MS excel
4.25%
IRR = Using IRR function in MS excel
3.30%
C-
WACC 5%
Year
cash flow B
cash flow A
incremental cash flow
0
-16
-29
-13
1
8
15
7
2
3
13
10
3
6
3
-3
Cross over rate
Using IRR function in MS excel
5.90%
Project A would be selected as WACC is 5%
WACC 10%
Year
cash flow B
cash flow A
incremental cash flow
0
-16
-29
-13
1
8
15
7
2
3
13
10
3
6
3
-3
Cross over rate
Using IRR function in MS excel
5.90%
No Project would be selected as WACC is 10%
WACC 15%
Year
cash flow B
cash flow A
incremental cash flow
0
-16
-29
-13
1
8
15
7
2
3
13
10
3
6
3
-3
Cross over rate
Using IRR function in MS excel
5.90%
No Project would be selected as WACC is 15%
A
Project A
project B
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 5%
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 5%
0
-29
-29
0
-16
-16
1
15
14.28571
1
8
7.619048
2
13
11.79138
2
3
2.721088
3
3
2.591513
3
6
5.183026
NPV
sum of present value of cash flow
-0.33139
NPV
sum of present value of cash flow
-0.47684
Project A
project B
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 10%
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 10%
0
-29
-29
0
-16
-16
1
15
13.63636
1
8
7.272727
2
13
10.7438
2
3
2.479339
3
3
2.253944
3
6
4.507889
NPV
sum of present value of cash flow
-2.36589
NPV
sum of present value of cash flow
-1.74005
Project A
project B
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 15%
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r= 15%
0
-29
-29
0
-16
-16
1
15
13.04348
1
8
6.956522
2
13
9.829868
2
3
2.268431
3
3
1.972549
3
6
3.945097
NPV
sum of present value of cash flow
-4.15411
NPV
sum of present value of cash flow
-2.82995
B-
Project A
WACC -5%
project B
WACC -5%
Year
cash flow
Year
cash flow
0
-29
0
-16
1
15
1
8
2
13
2
3
3
3
3
6
IRR = Using IRR function in MS excel
4.25%
IRR = Using IRR function in MS excel
3.30%
Project A
WACC -10%
project B
WACC -10%
Year
cash flow
Year
cash flow
0
-29
0
-16
1
15
1
8
2
13
2
3
3
3
3
6
IRR = Using IRR function in MS excel
4.25%
IRR = Using IRR function in MS excel
3.30%
Project A
WACC -15%
project B
WACC -15%
Year
cash flow
Year
cash flow
0
-29
0
-16
1
15
1
8
2
13
2
3
3
3
3
6
IRR = Using IRR function in MS excel
4.25%
IRR = Using IRR function in MS excel
3.30%
C-
WACC 5%
Year
cash flow B
cash flow A
incremental cash flow
0
-16
-29
-13
1
8
15
7
2
3
13
10
3
6
3
-3
Cross over rate
Using IRR function in MS excel
5.90%
Project A would be selected as WACC is 5%
WACC 10%
Year
cash flow B
cash flow A
incremental cash flow
0
-16
-29
-13
1
8
15
7
2
3
13
10
3
6
3
-3
Cross over rate
Using IRR function in MS excel
5.90%
No Project would be selected as WACC is 10%
WACC 15%
Year
cash flow B
cash flow A
incremental cash flow
0
-16
-29
-13
1
8
15
7
2
3
13
10
3
6
3
-3
Cross over rate
Using IRR function in MS excel
5.90%
No Project would be selected as WACC is 15%
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