Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:b. What are the projects' IRRs assuming the WACC is 5%? Do not round intermediate calculations. Round your answer to two decimal places.
Project A:
Project B:
What are the projects' IRRs assuming the WACC is 10%? Do not round intermediate calculations. Round your answer to two decimal places.
Project A:
Project B:
What are the projects' IRRs assuming the WACC is 15%? Do not round intermediate calculations. Round your answer to two decimal places.
Project A:
Project B:
%
c. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 3.86%.)
-Select-
If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 3.86%.)
-Select-
If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 3.86%.)
-Select-
%
%
%
%
%
Transcribed Image Text:CENGAGE MINDTAP
Week 6 Homework
Your division is considering two projects with the following cash flows (in millions):
0
2
1
%
Project A
-$20
Project B
-$13
a. What are the projects' NPVs assuming the WACC is 5%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as
10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places.
Project A: $
million
million
Project B: $
What are the projects' NPVs assuming the WACC is 10%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as
10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places.
Project A: $
million
Project B: $
million
What are the projects' NPVs assuming the WACC is 15%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as
10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places.
Project A: $
million
$5
$8
3
$9
$7
$12
$3
Project B: $
million
b. What are the projects' IRRs assuming the WACC is 5%? Do not round intermediate calculations. Round your answer to two decimal places.
Project A:
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- Please do not provide solution in image format and give proper explanation.arrow_forwardPlease answer the following questions using the information below: NPV. Using a 10% required rate of return, calculate the NPV for this project. Should it be accepted or rejected? PI. Calculate the Profitability Index (PI) for this project. Should it be accepted or rejected? Consider the following cash flows: Year 0 1 2 3 4 5 6 Cash Flow -$8,000 $3,000 $3,600 $2,700 $2,500 $2,100 $1,600 Payback. The company requires all projects to payback within 3 years. Calculate the payback period. Should it be accepted or rejected? Discounted Payback. Calculate the discounted payback using a discount rate of 10%. Should it be accepted or rejected? IRR. Calculate the IRR for this project. The company’s required rate of return is 10%. Should it be accepted or rejected? NPV. Using a 10% required rate of return, calculate the NPV for this project. Should it be accepted or rejected? PI. Calculate the Profitability Index (PI) for this project. Should it be accepted or rejected?…arrow_forwardDarin Clay, the CFO of MakeMoney.com, has to decide between the following two projects: Project Million 0 -$2,700 10+ 310 2 1,110 3 1,950 Year Project Billion -$10 lo+ 1,150 1,950 3,100 The expected rate of return for either of the two projects is 12 percent. What is the range of initial investment (lo) for which Project Billion is more financially attractive than Project Million? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Initial investment less than $ 5,530.00arrow_forward
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