chapter 11 8. NPV Your division is considering two projects with the following c

Question

chapter 11

8. NPV

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

a. What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A    $   million
Project B    $   million

b. What are the projects' NPVs assuming the WACC is 10%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A    $   million
Project B    $   million

c. What are the projects' NPVs assuming the WACC is 15%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A    $   million
Project B    $   million

d. What are the projects' IRRs assuming the WACC is 5%? Round your answer to two decimal places.
Project A   %
Project B   %

e. What are the projects' IRRs assuming the WACC is 10%? Round your answer to two decimal places.
Project A   %
Project B   %

f. What are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places.
Project A   %
Project B   %

Explanation / Answer

Using the information given in the question, we calculate NPV using the npv function in excel = npv(rate, value1, value2,..)

a) When WACC is 5 %

NPV for Project A = npv(5%, -21,14,9,3) = $ 2.94 Million

NPV for Project B = npv(5%, -35,20,8,15) = $ 4.06 Million

b) When WACC is 10 %

NPV for Project A = npv(10%, -21,14,9,3) = $ 1.29 Million

NPV for Project B = npv(10%, -35,20,8,15) = $ 0.97 Million

c) When WACC is 15 %

NPV for Project A = npv(15%, -21,14,9,3) = - $ 0.04 Million

NPV for Project B = npv(15%, -35,20,8,15) = - $ 1.48 Million

d) When WACC is 5 %

IRR for Project A = irr(-21,14,9,3) = 14.83%

NPV for Project B = irr(-35,20,8,15) = 11.84%

e) When WACC is 10 %

IRR for Project A = irr(-21,14,9,3) = 14.83%

NPV for Project B = irr(-35,20,8,15) = 11.84%

f) When WACC is 15 %

IRR for Project A = irr(-21,14,9,3) = 14.83%

NPV for Project B = irr(-35,20,8,15) = 11.84%

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