CAPITAL BUDGETING CRITERIA A company has a 13% WACC and is considering two mutua
ID: 2792642 • Letter: C
Question
CAPITAL BUDGETING CRITERIA
A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
Project A $
Project B $
What is each project's IRR? Round your answer to two decimal places.
Project A %
Project B %
What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations.
Project A %
Project B %
From your answers to parts a-c, which project would be selected?
-Select-Project AProject BItem 7
If the WACC was 18%, which project would be selected?
-Select-Project AProject BItem 8
Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.
%
What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations.
Project A %
Project B %
CAPITAL BUDGETING CRITERIA
A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
0 1 2 3 4 5 6 7 Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$405 $135 $135 $135 $135 $135 $135 $0What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
Project A $
Project B $
What is each project's IRR? Round your answer to two decimal places.
Project A %
Project B %
What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations.
Project A %
Project B %
From your answers to parts a-c, which project would be selected?
-Select-Project AProject BItem 7
If the WACC was 18%, which project would be selected?
-Select-Project AProject BItem 8
Construct NPV profiles for Projects A and B. Round your answers to the nearest cent. Do not round your intermediate calculations. Negative value should be indicated by a minus sign. Discount Rate NPV Project A NPV Project B 0% $ $ 5 10 12 15 18.1 24.29
Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.
%
What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations.
Project A %
Project B %
Explanation / Answer
discount rate
1. 0.05
2.
3.
4.
5
6
Project A PVF @ 13 Present value Year Project B PVF @ 13 Present value -300 1 -300 0 -405 1 -405 -387 0.884955752 -342.4778761 1 135 0.884955752 119.4690265 -193 0.783146683 -151.1473099 2 135 0.783146683 105.7248023 -100 0.693050162 -69.30501623 3 135 0.693050162 93.56177191 600 0.613318728 367.9912366 4 135 0.613318728 82.79802824 600 0.542759936 325.6559616 5 135 0.542759936 73.27259136 850 0.542759936 461.3459456 6 135 0.542759936 73.27259136 -180 0.425060644 -76.51091587 7 0 0.425060644 0 npv 215.5520257 143.0988117 select project A Project A PVF @ 13 Present value Year Project B PVF @ 13 Present value -300 1 -300 0 -405 1 -405 -387 0.884955752 -342.4778761 1 135 0.884955752 119.4690265 -193 0.783146683 -151.1473099 2 135 0.783146683 105.7248023 -100 0.693050162 -69.30501623 3 135 0.693050162 93.56177191 600 0.613318728 367.9912366 4 135 0.613318728 82.79802824 600 0.542759936 325.6559616 5 135 0.542759936 73.27259136 850 0.542759936 461.3459456 6 135 0.542759936 73.27259136 -180 0.425060644 -76.51091587 7 0 0.425060644 0 Irr 6% irr= 10% Project A PVF @ 13 Present value Year Project B PVF @ 13 Present value -300 1 -300 0 -405 1 -405 -387 0.884955752 -342.4778761 1 135 0.884955752 119.4690265 -193 0.783146683 -151.1473099 2 135 0.783146683 105.7248023 -100 0.693050162 -69.30501623 3 135 0.693050162 93.56177191 600 0.613318728 367.9912366 4 135 0.613318728 82.79802824 600 0.542759936 325.6559616 5 135 0.542759936 73.27259136 850 0.542759936 461.3459456 6 135 0.542759936 73.27259136 -180 0.425060644 -76.51091587 7 0 0.425060644 0 MIRR 9% mirr= 12%Related Questions
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