Question

# A company has an 11% WACC and is considering two mutually exclusive investments (that cannot be...

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
1. 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: \$

Project B: \$

2. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.

Project A:   %

Project B:   %

3. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places.

Project A:   %

Project B:   %

4. From your answers to parts a-c, which project would be selected?

-Select-Project AProject BItem 7

If the WACC was 18%, which project would be selected?

-Select-Project AProject BItem 8

5. Construct NPV profiles for Projects A and B. If an amount is zero, enter 0. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent.

 Discount Rate NPV Project A NPV Project B 0% \$ \$ 5 10 12 15 18.1 24.18
6. Calculate the crossover rate where the two projects' NPVs are equal. Do not round intermediate calculations. Round your answer to two decimal places.

%

7. What is each project's MIRR at a WACC of 18%? Do not round intermediate calculations. Round your answers to two decimal places.

Project A:   %

Project B:   %

11.8