Question
A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be...
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 | $133 | $133 | $133 | $133 | $133 | $133 | $0 |
-
What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
-
What is each project's IRR? Round your answer to two decimal places.
-
What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations.
Homework Answers
Answer #1
| Year | Project A | Project B |
| 0 | -300 | -400 |
| 1 | -387 | 133 |
| 2 | -193 | 133 |
| 3 | -100 | 133 |
| 4 | 600 | 133 |
| 5 | 600 | 133 |
| 6 | 850 | 133 |
| 7 | -180 | 0 |
| IRR | 18.10% | 24.18% |
| NPV | $200.41 | $146.82 |
| MIRR | 16.34% | 17.12% |
Workings in excel:
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