NPV Your division is considering two projects with the following cash flows (in
ID: 2657874 • Letter: N
Question
NPV Your division is considering two projects with the following cash flows (in millions)
Project A -$27 $13 $17 $8
Project B -$25 $14 $11 $2
What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
Project A
$ million
Project B
$ million
What are the projects' NPVs assuming the WACC is 10%? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
Project A $ million
Project B $ million
What are the projects' NPVs assuming the WACC is 15%? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
Project A $ million
Project B $ million
What are the projects' IRRs assuming the WACC is 5%? Round your answer to two decimal places. Do not round your intermediate calculations.
Project A %
Project B %
What are the projects' IRRs assuming the WACC is 10%? Round your answer to two decimal places. Do not round your intermediate calculations
. Project A %
Project B %
What are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places. Do not round your intermediate calculations.
Project A %
Project B %
If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 90.37%.) If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 90.37%.) If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 90.37%.)
Explanation / Answer
Project A:
NPV at 5% = 7.71
NPV at 10% = 4.88
NPV at 15% = 2.42
IRR = 20.67% (for all rates)
Project B:
NPV at 5% = 0.04
NPV at 10% = -1.68
NPV at 15% = -3.19
IRR = 5.10%
choose A for 5%, 10% and 15%
Discount rate 5.0000% Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow (27.000) 0 (27.00) (27.00) 13.000 1 12.38 (14.62) 17.000 2 15.42 0.80 8.000 3 6.91 7.71Related Questions
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