Question
Your division is considering two investment projects, each of which requires an up-front expenditure of $22...
Your division is considering two investment projects, each of which requires an up-front expenditure of $22 million. You estimate that the cost of capital is 11% and that the investments will produce the following after-tax cash flows (in millions of dollars):
| Year | Project A | Project B | ||
| 1 | 5 | 20 | ||
| 2 | 10 | 10 | ||
| 3 | 15 | 8 | ||
| 4 | 20 | 6 | ||
- If the two projects are mutually exclusive and the cost of
capital is 15%, which project should the firm undertake?
The firm should undertake -Select-
- What is the crossover rate? Round your answer to two decimal
places.
%
- If the cost of capital is 11%, what is the modified IRR (MIRR)
of each project? Do not round intermediate calculations. Round your
answers to two decimal places.
Project A: %
Project B: %
Homework Answers
Answer #1
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