A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2 3 4 5 6 7 Project A -$300 Project B -$405 -$387 -$193 $132 $132 -$100 $132 $600 $132 $600 $132 $850 -$180 $132 $0 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. Project A: $ Project B: $ b. What is each project's IRR? Round your answer to two decimal places. Project A: Project B: % % c. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations. Project A: % Project B: % d. From your answers to parts a-c, which project would be selected? If the WACC was 18%, which project would be selected? e. Construct NPV profiles for Projects A and B. Round your answers to the nearest cent. Do not round your intermediate calculations. Negative value should be indicated by a minus sign. Discount Rate 0% 5 10 12 15 18.1 23.33 NPV Project A NPV Project B $ $ $ $ f. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations. % g. What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations. Project A: Project B: % %
A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2 3 4 5 6 7 Project A -$300 Project B -$405 -$387 -$193 $132 $132 -$100 $132 $600 $132 $600 $132 $850 -$180 $132 $0 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. Project A: $ Project B: $ b. What is each project's IRR? Round your answer to two decimal places. Project A: Project B: % % c. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations. Project A: % Project B: % d. From your answers to parts a-c, which project would be selected? If the WACC was 18%, which project would be selected? e. Construct NPV profiles for Projects A and B. Round your answers to the nearest cent. Do not round your intermediate calculations. Negative value should be indicated by a minus sign. Discount Rate 0% 5 10 12 15 18.1 23.33 NPV Project A NPV Project B $ $ $ $ f. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations. % g. What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations. Project A: Project B: % %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
0
1
2
3
4
5
6
7
Project A -$300
Project B -$405
-$387 -$193
$132 $132
-$100
$132
$600
$132
$600
$132
$850 -$180
$132
$0
The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.
Open spreadsheet
a. What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
Project A: $
Project B: $
b. What is each project's IRR? Round your answer to two decimal places.
Project A:
Project B:
%
%
c. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate
calculations.
Project A:
%
Project B:
%
Transcribed Image Text:d. From your answers to parts a-c, which project would be selected?
If the WACC was 18%, which project would be selected?
e. Construct NPV profiles for Projects A and B. Round your answers to the nearest cent. Do not round your intermediate calculations. Negative value should be
indicated by a minus sign.
Discount Rate
0%
5
10
12
15
18.1
23.33
NPV Project A
NPV Project B
$
$
$
$
f. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.
%
g. What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations.
Project A:
Project B:
%
%
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