Your division is considering two projects with the following cash flows (in mill

Question

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

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

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

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

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

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

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

If the WACC were 5% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 26.71%.)

If the WACC were 10% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 26.71%.)

If the WACC were 15% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 26.71%.)

Explanation / Answer

Statemnt showing calculation of NPV Project A Project B Particulars Time   PVF@5% Amount PV Amount PV Cash outflows                   -                 1.00            (11.00)           (11.00)           (20.00)                     (20.00) PV of cash outflows           (11.00)                     (20.00) Cash Inflows               1.00          0.9524                 4.00                3.81              12.00                       11.43 Cash Inflows               2.00          0.9070                 7.00                6.35                5.00                         4.54 Cash Inflows               3.00          0.8638                 1.00                0.86                9.00                         7.77 PV of cash inflows              11.02                       23.74 NPV                0.02                         3.74 Project B should be selected since NPV is higher Statemnt showing calculation of NPV Project A Project B Particulars Time   PVF@10% Amount PV Amount PV Cash outflows                   -                 1.00            (11.00)           (11.00)           (20.00)                     (20.00) PV of cash outflows           (11.00)                     (20.00) Cash Inflows               1.00          0.9091                 4.00                3.64              12.00                       10.91 Cash Inflows               2.00          0.8264                 7.00                5.79                5.00                         4.13 Cash Inflows               3.00          0.7513                 1.00                0.75                9.00                         6.76 PV of cash inflows              10.17                       21.80 NPV              (0.83)                         1.80 Project B should be selected since NPV is higher Statemnt showing calculation of NPV Project A Project B Particulars Time   PVF@15% Amount PV Amount PV Cash outflows                   -                 1.00            (11.00)           (11.00)           (20.00)                     (20.00) PV of cash outflows           (11.00)                     (20.00) Cash Inflows               1.00          0.8696                 4.00                3.48              12.00                       10.43 Cash Inflows               2.00          0.7561                 7.00                5.29                5.00                         3.78 Cash Inflows               3.00          0.6575                 1.00                0.66                9.00                         5.92 PV of cash inflows                9.43                       20.13 NPV              (1.57)                         0.13 Project B should be selected since NPV is higher Project A's IRR is 5% as NPV is 0 at5% Project B's IRR is around 15%as NPV is 0 at 15%

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