Question

Gardial Fisheries is considering two mutually exclusive
investments. The projects' expected net cash flows are as
follows:

Expected Net Cash Flows

Time Project A Project B

0 ($375) ($575)

1 ($300) $190

2 ($200) $190

3 ($100) $190

4 $600 $190

5 $600 $190

6 $926 $190

7 ($200) $0

a. If each project's cost of capital is 12%, which project
should be selected? If the cost of capital is 18%, what project is
the proper choice?

@ 12% cost of capital @ 18% cost of capital

Use Excel's NPV function as explained in this chapter's Tool
Kit. Note that the range does not include the costs, which are
added separately.

WACC = 12% WACC = 18%

NPV A = NPV A =

NPV B = NPV B =

c. What is each project's IRR?

We find the internal rate of return with Excel's IRR
function:

IRR A =

Note in the graph above that the X-axis intercepts are equal
to the two projects' IRRs.

IRR B =

e. What is each project's MIRR at a cost of capital of 12%? At
r = 18%? Hint: note that B is a 6-year project.

@ 12% cost of capital @ 18% cost of capital

MIRR A = MIRR A =

MIRR B = MIRR B =

f. What is the regular payback period for these two
projects?

Project A

Time period 0 1 2 3 4 5 6 7

Cash flow (375) (300) (200) (100) 600 $600 $926 ($200)

Cumulative cash flow

Intermediate calculation for payback

Payback using intermediate calculations

Project B

Time period 0 1 2 3 4 5 6 7

Cash flow

Cumulative cash flow

Intermediate calculation for payback

Payback using intermediate calculations

Payback using PERCENTRANK Ok because cash flows follow normal
pattern.

g. At a cost of capital of 12%, what is the discounted payback
period for these two projects?

WACC = 12%

Project A

Time period 0 1 2 3 4 5 6 7

Cash flow

Disc. cash flow

Disc. cum. cash flow

Intermediate calculation for payback

Payback using intermediate calculations

Project B

Time period 0 1 2 3 4 5 6 7

Cash flow

Disc. cash flow

Disc. cum. cash flow

Intermediate calculation for payback

Payback using intermediate calculations

Discounted Payback using PERCENTRANK Ok because cash flows
follow normal pattern.

h. What is the profitability index for each project if the
cost of capital is 12%?

PV of future cash flows for A:

PI of A:

PV of future cash flows for B:

PI of B:

Answer #1

1)

Need BOLD areas answered.
Gardial Fisheries
is considering two mutually exclusive investments. The projects'
expected net cash flows are as follows:
Expected Net Cash Flows
Time
Project A
Project B
0
($375)
($575)
1
($300)
$190
2
($200)
$190
3
($100)
$190
4
$600
$190
5
$600
$190
6
$926
$190
7
($200)
$0
f.
What is the regular payback period for these two projects?
Project A
Time period
0
1
2
3
4
5
6
7
Cash flow
(375)...

Show formula (how did you calculate the answer) and answer for
Dis Cumulative Cash Flow and immediate calc for payback
g. At a cost of capital of
12%, what is the discounted payback period for these two
projects?
WACC =
12%
Project A
Time period
0
1
2
3
4
5
6
7
Cash flow
-$375
-$300
-$200
-$100
$600
$600
$926
-$200
Disc. cash flow
-$375
-$268
-$159
-$71
$381
$340
$469
-$90
Disc. cum. cash flow
Intermediate calculation for payback...

Cummings Products Company is considering two mutually exclusive
investments whose expected net cash flows are as follows: EXPECTED
NET CASH FLOWS Year Project A Project B 0 -$320 -$360 1 -387 134 2
-193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 What
is each project's IRR? Do not round intermediate calculations.
Round your answers to two decimal places Calculate the two
projects' NPVs, if you were told that each project's cost...

If mutually exclusive projects with normal cash flows are being
analyzed, the net present value (NPV) and internal rate of return
(IRR) methods agree.
Projects Y and Z are mutually exclusive projects. Their cash
flows and NPV profiles are shown as follows.
Year
Project Y
Project Z
0
–$1,500
–$1,500
1
$200
$900
2
$400
$600
3
$600
$300
4
$1,000
$200
If the weighted average cost of capital (WACC) for each project
is 14%, do the NPV and...

NPV and IRR Analysis
Cummings Products Company is considering two mutually exclusive
investments whose expected net cash flows are as follows:
EXPECTED NET
CASH FLOWS
Year
Project A
Project B
0
-$300
-$405
1
-387
134
2
-193
134
3
-100
134
4
600
134
5
600
134
6
850
134
7
-180
134
What is each project's MIRR at a cost of capital of 10%? (Hint:
Consider Period 7 as the end of Project B's life.) Do not round...

13. NPV and IRR Analysis
Cummings Products Company is considering two mutually exclusive
investments whose expected net cash flows are as follows:
Expected Net Cash Flows
Year
Project A
Project B
0
-$400
-$650
1
-528
210
2
-219
210
3
-150
210
4
1,100
210
5
820
210
6
990
210
7
-325
210
Select the correct graph for NPV profiles for Projects A and
B.
The correct graph is (select one) graph __?
What is each project's...

A company has a 12% WACC and is considering two mutually
exclusive investments (that cannot be repeated) with the following
cash flows:
0
1
2
3
4
5
6
7
Project A
-$300
-$387
-$193
-$100
$600
$600
$850
-$180
Project B
-$400
$135
$135
$135
$135
$135
$135
$0
What is each project's NPV? Negative values, if any, should be
indicated by a minus sign. Do not round intermediate calculations.
Round your answers to the nearest cent.
Project A:...

A company has an 11% WACC and is considering two mutually
exclusive investments (that cannot be repeated) with the following
cash flows:
0
1
2
3
4
5
6
7
Project A
-$300
-$387
-$193
-$100
$600
$600
$850
-$180
Project B
-$400
$133
$133
$133
$133
$133
$133
$0
What is each project's NPV? Negative values, if any, should be
indicated by a minus sign. Do not round intermediate calculations.
Round your answers to the nearest cent.
Project A:...

A company has a 13% WACC and is considering two mutually
exclusive investments (that cannot be repeated) with the following
cash flows:
0
1
2
3
4
5
6
7
Project A
-$300
-$387
-$193
-$100
$600
$600
$850
-$180
Project B
-$405
$134
$134
$134
$134
$134
$134
$0
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.
Open spreadsheet
What is each...

A company has a 13% WACC and is considering two mutually
exclusive investments (that cannot be repeated) with the following
cash flows:
0
1
2
3
4
5
6
7
Project A
-$300
-$387
-$193
-$100
$600
$600
$850
-$180
Project B
-$405
$131
$131
$131
$131
$131
$131
0
A. What is each project's NPV? Round your answer to the nearest
cent.
Project A:
Project B:
B. What is each project's IRR? Round your answer to two decimal
places....

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