NPV Your division is considering two projects with the following cash flows (in
ID: 2791326 • Letter: N
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NPV Your division is considering two projects with the following cash flows (in millions) -$21 Project A Project B a. what are the pro ects' NPVs assuming the wACC is 59 ? Round your answer to two decimal places Do not round your inte $14 $20 $9 $8 $3 $15 ediate calculations Enter your answer in millions. For example, an answer of $10 550 000 should be entered as 10.55. Negative value should be indicated by a minus sign Project A Project B$ what are the projects' NPVs assuming the WACC is 10%? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign. Project A Project B$ What are the projects' NPVs assuming the WACC is 15967 Round your answer to two decimal places Do not ound your intermediate calculations. Enter your ans er in millions For example, an ans ver of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign Project A$ Project B$ million million million b, what are the projects' IRRs assuming the WACC is 5%? Round your answer to two decimal places. Do not round your intermediate calculations. Project A Project B What are the projects' IRRs assuming the WACC is 10% Round your answer to two decimal places. Do not round your intermediate calculations. Project A Project B what are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places. Do not round your intermediate calculations. Project A Project B c. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 8.76%) If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 8.76%.) If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 8.76%.)Explanation / Answer
Project A Year Cash Flow PV Factor @ 5% PV Factor @ 10% PV Factor @ 15% Present Value 5% Present Value 10% Present Value 15% 0 -$21.00 1.0000 1.0000 1.0000 -$21.00 -$21.00 -$21.00 1 $14.00 0.9524 0.9091 0.8696 $13.33 $12.73 $12.17 2 $9.00 0.9070 0.8264 0.7561 $8.16 $7.44 $6.81 3 $3.00 0.8638 0.7513 0.6575 $2.59 $2.25 $1.97 NPV $3.09 $1.42 -$0.05 IRR 14.83% Project B Year Cash Flow PV Factor @ 5% PV Factor @ 10% PV Factor @ 15% Present Value 5% Present Value 10% Present Value 15% 0 -$35.00 1.0000 1.0000 1.0000 -$35.00 -$35.00 -$35.00 1 $20.00 0.9524 0.9091 0.8696 $19.05 $18.18 $17.39 2 $18.00 0.9070 0.8264 0.7561 $16.33 $14.88 $13.61 3 $5.00 0.8638 0.7513 0.6575 $4.32 $3.76 $3.29 NPV $4.69 $1.81 -$0.71 IRR 13.53% Part a NPV WACC 5% WACC 10% WACC 15% Project A $3.09 $1.42 -$0.05 Project B $4.69 $1.81 -$0.71 Part b IRR WACC 5% WACC 10% WACC 15% Project A 14.83% 14.83% 14.83% Project B 13.53% 13.53% 13.53% Part c WACC 5% WACC 10% WACC 15% Project B Project B No Project as NPV is negative
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