7. Your division is considering two investment projects, each of which requires an upfront expenditure of $17 million. You estimate that the investments will produce the following net cash flows:
Year 
Project A 
Project B 

1 
$ 4,000,000 
$20,000,000 

2 
10,000,000 
10,000,000 

3 
20,000,000 
6,000,000 
Project A: $__
Project B: $__
What are the two projects' net present values, assuming the cost of capital is 10%? Do not round intermediate calculations. Round your answers to the nearest dollar.
Project A: $__
Project B: $__
What are the two projects' net present values, assuming the cost of capital is 15%? Do not round intermediate calculations. Round your answers to the nearest dollar.
Project A: $__
Project B: $__
Project A: __ %
Project B: __%
8. Edelman Engineering is considering including two pieces of equipment, a truck, and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $15,000, and that for the pulley system is $21,000. The firm's cost of capital is 11%. Aftertax cash flows, including depreciation, are as follows:
Year 
Truck 
Pulley 

1 
$5,100 
$7,500 

2 
5,100 
7,500 

3 
5,100 
7,500 

4 
5,100 
7,500 

5 
5,100 
7,500 
Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Use a minus sign to enter negative values, if any.
Truck 
Pulley 

Value 
Decision 
Value 
Decision 

IRR 
__% 
(select one) Accept/Reject 
__ % 
(select one)Accept/Reject 

NPV 
$__ 
(select one) Accept/Reject 
$ __ 
(select one) Accept/Reject 

MIRR 
__% 
(select one) Accept/Reject 
__% 
(select one)Accept/Reject 
7 a) At the cost of capital of 5%
NPV of A (in million $) = 17+ 4/1.05+10/1.05^2+20/1.05^3
=$13.15657056 million
or $13,156,571
NPV of B (in million $) = 17+ 20/1.05+10/1.05^2+6/1.05^3
=$16.3009394 million
or $16,300,939
At the cost of capital of 10%
NPV of A (in million $) = 17+ 4/1.1+10/1.1^2+20/1.1^3
=$9.927122 million
or $9,927,122
NPV of B (in million $) = 17+ 20/1.1+10/1.1^2+6/1.1^3
=$13.954170 million
or $13,954,170
At the cost of capital of 15%
NPV of A (in million $) = 17+ 4/1.15+10/1.15^2+20/1.15^3
=$7.190022 million
or $7,190,022
NPV of B (in million $) = 17+ 20/1.15+10/1.15^2+6/1.15^3
=$11.897838 million
or $11,897,838
IRR is the discount rate at which NPV =0
IRR (r) of project A is given by
17+4/(1+r)+10/(1+r)^2+20/(1+r)^3 = 0
From SOLVER in excel OR by using hit and trial method,
r = 0.3354 or 33.54%
IRR of project A = 33.54%
IRR (r) of project B is given by
17+20/(1+r)+10/(1+r)^2+6/(1+r)^3 = 0
From SOLVER in excel OR by using hit and trial method,
r = 0.6592 or 65.92%
IRR of project B = 65.92%
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