You are considering the following two projects and can take only one. Your cost of capital is 10.7%. The cash flows for the two projects are as follows ($ million): a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c. At what cost of capital are you indifferent between the two projects? d. What should you do? Data table (Click on the following icon in order to copy its contents into a spreadsheet.) a. What is the IRR of each project? Year 0 Year 1 Year 2 Year 3 Project A B $24 The IRR for project A is%. (Round to one decimal place.) $31 $38 - $102 - $102 $49 $38 $31 The IRR for project B is%. (Round to one decimal place.) b. What is the NPV of each project at your cost of capital? The NPV for project A is $ million. (Round to two decimal places.) Done The NPV for project B is $ million. (Round to two decimal places.) c. At what cost of capital are you indifferent between the two projects? You will be indifferent if the cost of capital is %. (Round to one decimal place.) Print

You are considering the following two projects and can take only one. Your cost of capital is 10.7%. The cash flows for the two projects are as follows ($ million): a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c. At what cost of capital are you indifferent between the two projects? d. What should you do? Data table (Click on the following icon in order to copy its contents into a spreadsheet.) a. What is the IRR of each project? Year 0 Year 1 Year 2 Year 3 Project A B $24 The IRR for project A is%. (Round to one decimal place.) $31 $38 - $102 - $102 $49 $38 $31 The IRR for project B is%. (Round to one decimal place.) b. What is the NPV of each project at your cost of capital? The NPV for project A is $ million. (Round to two decimal places.) Done The NPV for project B is $ million. (Round to two decimal places.) c. At what cost of capital are you indifferent between the two projects? You will be indifferent if the cost of capital is %. (Round to one decimal place.) Print

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section10.6: Profitability Index (pi)

Problem 2ST

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