Capital budgeting criteria A company has a 12% WACC and is considering two mutua

Question

Capital budgeting criteria

A company has a 12% 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.
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.
Project A ___%
Project B ___%

Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places.
__________%

What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places.
Project A %
Project B %

Explanation / Answer

The same question was resolved before with different figures. Please input your figure to get your answer. Let me know if you face any issue. Please rate if I succeeded in helping you.

old question

A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
Project A: -300, -387, -193, -100, 600, 600, 850, -180
Project B: -405, 134, 134, 134, 134, 134, 134, 0

a. What is each project's NPV?
b. What is each project's IRR?
c. What is each project's MIRR?
d. From your answers to Parts a, b, and c, which project would be selected? If the WACC was 18%, which project would be selected?
e. Construct NPV profiles for Projects A and B.
f. Calculate the crossover rate where the two projects' NPVs are equal.
g. What is each project's MIRR at a WACC of 18%

Answer

(1) Calculating Net Present Value (NPV):
PROJECT - A
Year
Cashflow
PV Factor at 12%
Net Present Values
0
($300)
1
($300)
1
($387)
0.8929
($345.55)
2
($193)
0.7972
($153.86)
3
($100)
0.7118
($71.18)
4
$600
0.6355
$381.30
5
$600
0.5674
$340.44
6
$850
0.5066
$430.61
7
($180)
0.4523
($81.41)
Net Present Value
$200.35
PROJECT - B
Year
Cashflow
PV Factor at 12%
Net Present Values
0
($405)
1
($405)
1
$134
0.8929
$119.65
2
$134
0.7972
$106.82
3
$134
0.7118
$95.38
4
$134
0.6355
$85.16
5
$134
0.5674
$76.03
6
$134
0.5066
$67.88
Net Present Value
$145.92
(2) Calculating MIRR:
Calculating MIRR for Project "A"
Calculating Present Value of Negative Cash flows:
Year
Cashflows
Present Value facto at 12%
Present Values
0
($300)

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.