Payback, NPV, and MIRR Your division is considering two investment projects, eac

Question

Payback, NPV, and MIRR

Your division is considering two investment projects, each of which requires an up-front expenditure of $24 million. You estimate that the cost of capital is 9% and that the investments will produce the following after-tax cash flows (in millions of dollars):

What is the regular payback period for each of the projects? Round your answers to two decimal places.

Project A years

Project B years

What is the discounted payback period for each of the projects? Round your answers to two decimal places.

Project A years

Project B years

If the two projects are independent and the cost of capital is 9%, which project or projects should the firm undertake?
-Select-Project AProject BBoth projectsItem 5

If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?
-Select-Project AProject BItem 6

If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
-Select-Project AProject BItem 7

What is the crossover rate? Round your answer to two decimal places.
%

If the cost of capital is 9%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.

Project A %

Project B %

Explanation / Answer

Answers : 1 Regular Payback Project A (Million $) Year 0 Year 1 Year 2 Year 3 Year 4 Cash Flows          (24.00)              5.00            10.00          15.00          20.00 Accumulated net cash flows          (19.00)            (9.00)            6.00 Paybak Period            2.60 Years   Payback Period Project B Year 0 Year 1 Year 2 Year 3 Year 4 Cash Flows          (24.00)            20.00            10.00            8.00            6.00 Accumulated net cash flows            (4.00)              6.00          14.00 Paybak Period              1.40 Years   2 Discounted Payback period Project A (Million $) Year 0 Year 1 Year 2 Year 3 Year 4 Cash Flows          (24.00)              5.00            10.00          15.00          20.00 PVF(9%)        1.00000        0.91743        0.84168      0.77218      0.70843 Present Value          (24.00)              4.59              8.42          11.58          14.17 Accumulated net cash flows          (19.41)          (11.00)            0.59 Doscounted Payback Period            2.95 Years   Project B Year 0 Year 1 Year 2 Year 3 Year 4 Cash Flows          (24.00)            20.00            10.00            8.00            6.00 PVF(9%)        1.00000        0.91743        0.84168      0.77218      0.70843 Present Value          (24.00)            18.35              8.42            6.18            4.25 Accumulated net cash flows            (5.65)              2.77            8.94 Doscounted Payback Period              1.67 Years

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