
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Subparts E, F and G please.

Transcribed Image Text:d. From your answers to parts a-c, which project would be selected?
Project A
If the WACC was 18%, which project would be selected?
Project B
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
Project B:
15
18.1
23.97
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.
%
NPV Project A
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:
%
NPV Project B
%

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:
Project A
Project B
-$300
-$405 $134
0
Project B: $
Project A:
Project B:
-$387 -$193
Project A:
1
Project B:
162.48
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.
130.67
Open spreadsheet
a. What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
Project A: $
18.10
b. What is each project's IRR? Round your answer to two decimal places.
23.97 %
15.60
2
%
17.61
3
4
%
5
%
6
$600
$600
$850
-$100
$134 $134 $134 $134 $134
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.
7
-$180
$0
Expert Solution

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Step 1: Given Information:
Here,
WACC = 13%
To Find:
Part E. NPV profiles at different rates =?
Part F. Crossover rate =?
Part G. MIRR at 18% WACC =?
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