A firm with a 13% WACC is evaluating two projects for this year\'s capital budge

Question

A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 0 1 2 3 4 5 Project A -$18,000 $6,000 $6,000 $6,000 $6,000 $6,000 Project B -$54,000 $16,800 $16,800 $16,800 $16,800 $16,800 Calculate NPV for each project. Round your answers to the nearest cent. Project A $ Project B $ Calculate IRR for each project. Round your answers to two decimal places. Project A % Project B % Calculate MIRR for each project. Round your answers to two decimal places. Project A % Project B % Calculate payback for each project. Round your answers to two decimal places. Project A years Project B years Calculate discounted payback for each project. Round your answers to two decimal places. Project A years Project B years

Explanation / Answer

Project A
NPV = -18000 + 6000(1/1.13 + 1/1.132+...+1/1.135) = 3102

IRR 0 = -18000 + 6000(1/r+ 1/r2+...+1/r5) r = 19.86%

project B

NPV =  -54000 +16800(1/1.13 + 1/1.132+...+1/1.135) = 5085.6

IRR, 0 =-54000 +16800(1/r + 1/r2+...+1/r5)= 16.80%

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