NPV Your division is considering two projects with the following cash flows (in

Question

NPV

Your division is considering two projects with the following cash flows (in millions):

What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A    $   {C} million
Project B    $   {C} million

What are the projects' NPVs assuming the WACC is 10%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A    $   million
Project B    $   million

What are the projects' NPVs assuming the WACC is 15%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A    $   {C} million
Project B    $   {C} million

What are the projects' IRRs assuming the WACC is 5%? Round your answer to two decimal places.
Project A   %
Project B   %

What are the projects' IRRs assuming the WACC is 10%? Round your answer to two decimal places.
Project A   {C}%
Project B   {C}%

What are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places.
Project A   %
Project B   %

If the WACC were 5% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 89.04%.)
-Select-Project AProject BNeither A, nor BItem 13

If the WACC were 10% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 89.04%.)
-Select-Project AProject BNeither A, nor BItem 14

If the WACC were 15% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 89.04%.)
-Select-Project AProject BNeither A, nor BItem 15

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Explanation / Answer

When WACC were 5%, NAV of the Projects are:

When WACC were 10%, NAV of the Projects are:

4.12

When WACC were 15%, NAV of the Projects are:

Projects' IRRs assuming the WACC is 5% were :

Project A - 89.04%

Project B - 34.82 %

Projects' IRRs assuming the WACC is 10% were:

Project A - 70.79%

Project B - 24.24%

Projects' IRRs assuming the WACC is 15% were:

Project A - 55.26%

Project B - 15.12%

If the WACC were 5% and A and B were mutually exclusive and the crossover rate is 89.04%, we will choose Project A as the IRR is 89.04%.

If the WACC were 10% and A and B were mutually exclusive and the crossover rate is 89.04%, we will choose neither Projects as the IRR is below 89.04% of both the projects.

If the WACC were 15% and A and B were mutually exclusive and the crossover rate is 89.04%, we will choose neither Projects as the IRR is below 89.04% of both the projects.

PD. PROJECT A-CF NAV-ACCU NAV OF CASH FLOW PROJECT B-CF NAV-ACC NAV OF CASH FLOW 0 (19) (19) (17) (17) 1 8 1.05 7.62 11 1.05 10.48 2 15 1.10 13.64 8 1.10 7.27 3 17 1.16 14.65 6 1.16 5.17 NAV-DIS 16.91 5.92

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