NPV Your division is considering two projects with the following cash flows (in
ID: 2796759 • Letter: N
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. 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 $ million ANSWER
Project B $ million ANSWER
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 $ million ANSWER
Project B $ million ANSWER
What are the projects' NPVs assuming the WACC is 15%? 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 $ million ANSWER
Project B $ million ANSWER
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 % ANSWER
Project B % ANSWER
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 %ANSWER
Project B %ANSWER
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 %ANSWER
Project B %ANSWER
If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 8.76%.)
-Select-Project A Project B Neither A, nor B
If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 8.76%.)
-Select-Project A Project B Neither A, nor B
If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 8.76%.)
-Select-Project A Project B Neither A, nor B
Explanation / Answer
1)
NPV A = -21 + NPV(5%,14,9,3) = 3.09
NPV B = -35 + NPV(5%,20,8,15) = 4.26
2)
NPV A = -21 + NPV(10%,14,9,3) = 1.42
NPV B = -35 + NPV(10%,20,8,15) = 1.06
3)
NPV A = -21 + NPV(15%,14,9,3) = -0.05
NPV B = -35 + NPV(15%,20,8,15) = -1.70
4)
IRR of A = IRR(-21,14,9,3) = 14.83%
IRR of B = IRR(-35,20,8,15) = 11.84%
5)
NPV of B > NPV of A, choose B
5)
NPV of A > NPV of B, choose A
5)
NPV of B < 0
NPV of A < 0
Neither A Nor B
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