A company with a WACC of 14% is evaluating two projects for this year. The following is the estimated cash flow after deducting tax, including depreciation, as follows: (on the image below) a. Calculate the NPV, IRR, and payback, for each of these projects. b. If it were assumed that the two projects were independent, which project would you recommend? c. If the two projects were mutually exclusive, which project would you recommend?
A company with a WACC of 14% is evaluating two projects for this year. The following is the estimated cash flow after deducting tax, including depreciation, as follows: (on the image below) a. Calculate the NPV, IRR, and payback, for each of these projects. b. If it were assumed that the two projects were independent, which project would you recommend? c. If the two projects were mutually exclusive, which project would you recommend?
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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A company with a WACC of 14% is evaluating two projects for this year. The following is the estimated cash flow after deducting tax, including depreciation, as follows: (on the image below)
a. Calculate the NPV, IRR, and payback, for each of these projects.
b. If it were assumed that the two projects were independent, which project would you recommend?
c. If the two projects were mutually exclusive, which project would you recommend?
Transcribed Image Text:3
5
+
Project A
Project B
-$6,000
-$18,000
$2,000
$5,600
$2,000
$5,600
$2,000
$5,600
$2,000
$2,000
$5,600
$5,600
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