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. 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   %

Explanation / Answer

A) when WACC is 5%

Project A

NPV='-cfo+cf1/(1+r)+cf2/(1+r)^2+cf3/(1+r)^3

=-19+8/(1.05)+15/(1.05)^2+17/(1.05)^3

=$16.91 m

Project B

NPV='-cfo+cf1/(1+r)+cf2/(1+r)^2+cf3/(1+r)^3

=-17+11/(1.05)+8/(1.05)^2+6/(1.05)^3

= $5.92 M

B) when WACC is 10%

Project A

NPV='-cfo+cf1/(1+r)+cf2/(1+r)^2+cf3/(1+r)^3

=-19+8/(1.10)+15/(1.10)^2+17/(1.10)^3

=$13.44 m

Project B

NPV='-cfo+cf1/(1+r)+cf2/(1+r)^2+cf3/(1+r)^3

=-17+11/(1.10)+8/(1.10)^2+6/(1.10)^3

= $4.12M

C) When WACC is 15%

Project A

NPV='-cfo+cf1/(1+r)+cf2/(1+r)^2+cf3/(1+r)^3

=-19+8/(1.15)+15/(1.15)^2+17/(1.15)^3

=$10.48 m

Project b

NPV='-cfo+cf1/(1+r)+cf2/(1+r)^2+cf3/(1+r)^3

=-17+11/(1.15)+8/(1.15)^2+6/(1.15)^3

= $2.56 M

D) IRR is the rate at which NPV becomes zero, It depends on cash flow not on the WACC

so IRR will be same at 5%, 10% and 15 %

Project A in excel use =IRR(C1:C4) in cell C1 in CF0,in cell C2 in CF1,in cell C3 in CF2,in cell C4 in CF3,

IRR=42.04%

Project B in excel use =IRR(C1:C4) in cell C1 in CF0,in cell C2 in CF1,in cell C3 in CF2,in cell C4 in CF3,

IRR=24.96%

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