Your division is considering two investment projects, each of which requires an up-front expenditure of $22 million. You estimate that the cost of capital is 8% and that the investments will produce the following after-tax cash flows (in millions of dollars): Year Project A Project B 1 a. What is the regular payback period for each of the projects? Round your answers to two decimal places. Project A: years Project B: years c. Calculate the NPV of the two projects. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ Calculate the IRR of the two projects. Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: If the two projects are independent and the cost of capital is 8%, which project or projects should the firm undertake? The firm should undertake -Select- 2 Project B: years b. What is the discounted payback period for each of the projects? Do not round intermediate calculations. Round your answers to two decimal places. Project A: years % 3 4 S 10 15 20 20 10 8 6

Your division is considering two investment projects, each of which requires an up-front expenditure of $22 million. You estimate that the cost of capital is 8% and that the investments will produce the following after-tax cash flows (in millions of dollars): Year Project A Project B 1 a. What is the regular payback period for each of the projects? Round your answers to two decimal places. Project A: years Project B: years c. Calculate the NPV of the two projects. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ Calculate the IRR of the two projects. Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: If the two projects are independent and the cost of capital is 8%, which project or projects should the firm undertake? The firm should undertake -Select- 2 Project B: years b. What is the discounted payback period for each of the projects? Do not round intermediate calculations. Round your answers to two decimal places. Project A: years % 3 4 S 10 15 20 20 10 8 6

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 27P

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