Cater company must choose between two mutually exclusive manufacturing projects, and each cost $10 million. Its WACC is 12%, and the net cash flows would be as follows: Project Cash flow 1 Cash flow 2 Cash flow 3 Cash flow 4 6 millions 3 million -1 million 2 millions M 3 million 3.5 million 3.5 million 1.5 million Required: 1. Calculate each project's payback period, net present value (NPV), internal rate of return (IRR), and modified internal rate of return (MIRR)? 2. Which project or projects should be accepted if they are independent? 3. Which project would be selected as view of NPV and IRR, if they are mutually exclusive projects?
Cater company must choose between two mutually exclusive manufacturing projects, and each cost $10 million. Its WACC is 12%, and the net cash flows would be as follows: Project Cash flow 1 Cash flow 2 Cash flow 3 Cash flow 4 6 millions 3 million -1 million 2 millions M 3 million 3.5 million 3.5 million 1.5 million Required: 1. Calculate each project's payback period, net present value (NPV), internal rate of return (IRR), and modified internal rate of return (MIRR)? 2. Which project or projects should be accepted if they are independent? 3. Which project would be selected as view of NPV and IRR, if they are mutually exclusive projects?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 21P: Your division is considering two investment projects, each of which requires an up-front expenditure...
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