CAPITAL BUDGETING CRITERIA A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:
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1.
=NPV(14%,{-18000;6000;6000;6000;6000;6000})*(1+14%)=2598.48581315076
2.
=NPV(14%,{-54000;16800;16800;16800;16800;16800})*(1+14%)=3675.76027682212
3.
=IRR({-18000;6000;6000;6000;6000;6000})=19.8577097873066%
4.
=IRR({-54000;16800;16800;16800;16800;16800})=16.7976214212598%
5.
=MIRR({-18000;6000;6000;6000;6000;6000},14%,14%)=17.1163178493378%
6.
=MIRR({-54000;16800;16800;16800;16800;16800},14%,14%)=15.5113780416976%
7.
=18000/6000=3.00
8.
=54000/16800=3.21428571428571
9.
=NPER(14%,-6000,18000)=4.15732579702627
10.
=NPER(14%,-16800,54000)=4.56265686330585
11.
Both projects would be accepted since both of their NPV's are
positive
12.
If the projects are mutually exclusive, the project with the
highest positive NPV is chosen. Accept Project N.
13.
The conflict between NPV and IRR occurs due to the difference in
the size of the projects
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