A firm with a 14% WACC is evaluating two projects for this year\'s capital budge

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:

a. Calculate NPV for each project. Round your answers to the nearest cent.
Project A $
Project B $

b. Calculate IRR for each project. Round your answers to two decimal places.
Project A %
Project B %

c. Calculate MIRR for each project. Round your answers to two decimal places.
Project A %
Project B %

d. Calculate payback for each project. Round your answers to two decimal places.
Project A years
Project B years

e. Calculate discounted payback for each project. Round your answers to two decimal places.
Project A years
Project B years

Explanation / Answer

Project A With MS Excel IRR = 19.86% NPV = $866.16 With FinXL IRR = 19.858 % With FinXL NPV = 866.16 With FinFreedom MIRR = 17.12 % With FinFreedom Payback Period = 3 yrs and 0 mo. With FinFreedom Discounted Payback Period = 4 yrs and 2 mo. With FinFreedom Profitability Index = 1.144 Project B With MS Excel IRR = 16.80% NPV = $1,225.25 With FinXL IRR = 16.797 % With FinXL NPV = $1225.25 With FinFreedom MIRR = 15.51% With FinFreedom Payback Period = 3 yrs and 3 mo. With FinFreedom Discounted Payback Period = 4 yrs and 7 mo. With FinFreedom Profitability Index = 1.068 ----------- Project A ------ Project B IRR ------ 19.86 % -------- 16.80% MIRR ------ 17.12 % -------- 15.51 NPV ------ $866.16 -------- $1225.25 PI ------ 1.144 ---------- 1.068 PBP ------ 3 yrs 0 mon ---- 3 yrs 3 mon DPBP ------ 4 yrs 2 mon ---- 4 yrs 7 mon Project A should be accepted instead of Project B Source(s): Freeware FinXL Calculators provide 53 MS Excel financial functions http://ms-excel.thinkanddone.com FinFreedom v1.0 is a MS Windows 30 functions financial calculator http://thinkanddone.com/calculators.html Manual calculations for IRR, NPV, MIRR, Payback and Discounted Payback Period and Profitability Index are illustrated here http://thinkanddone.com/forum/viewtopic.…

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