A firm with a 14% WACC is evaluating two projects for this year\'s capital budge
ID: 2789896 • Letter: A
Question
A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:
Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations.
Project M $
Project N $
Calculate IRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
Project M %
Project N %
Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
Project M %
Project N %
Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
Project M years
Project N years
Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
Project M years
Project N years
Explanation / Answer
Please see the below excel file for all the calculations for Project M:
Formula = current year CF + previous year CF
Formula = Current year CF*(1+wacc)^n
Year
Project M
Cumulative Cashflow
Discounted cashflow
Cumulative discounted CF
0
-24000
-24000
-24000.000
-24000.000
1
8000
-16000
9120.000
-14880.000
2
8000
-8000
10396.800
-4483.200
3
8000
0
11852.352
7369.152
4
8000
13511.681
5
8000
15403.317
NPV at 14% wacc
$3,039.16
Payback
Discounted payback
IRR
19.858%
3
2.378
MIRR
17.116%
Formula = 2+(11852.352-7369.1519)/11852.352
Please see the below excel file for all the calculations for Project N:
Formula = current year CF + previous year CF
Formula = Current year CF*(1+wacc)^n
Year
Project N
Cumulative Cashflow
Discounted cashflow
Cumulative discounted CF
0
-72000
-72000
-72000.000
-72000.000
1
22400
-49600
25536.000
-46464.000
2
22400
-27200
29111.040
-17352.960
3
22400
-4800
33186.586
15833.626
4
22400
17600
37832.708
5
22400
43129.287
NPV at 14% wacc
$4,299.13
Payback
Discounted payback
IRR
16.798%
3.273
2.523
MIRR
15.511%
Formula = 3+(22400-17600)/17600
Formula = 2+(33186.586-15833.626)/33186.586
NPV for each project:
Project M $3039.16
Project N $4299.13
IRR for each project:
Project M 19.86%
Project N 16.80%
Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
Project M 17.12%
Project N 15.51%
Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
Project M 3years
Project N 3.27years
Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
Project M 2.37years
Project N 2.52years
Formula = current year CF + previous year CF
Formula = Current year CF*(1+wacc)^n
Year
Project M
Cumulative Cashflow
Discounted cashflow
Cumulative discounted CF
0
-24000
-24000
-24000.000
-24000.000
1
8000
-16000
9120.000
-14880.000
2
8000
-8000
10396.800
-4483.200
3
8000
0
11852.352
7369.152
4
8000
13511.681
5
8000
15403.317
NPV at 14% wacc
$3,039.16
Payback
Discounted payback
IRR
19.858%
3
2.378
MIRR
17.116%
Formula = 2+(11852.352-7369.1519)/11852.352
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