Question

Your division is considering two projects with the following cash flows (in millions):

0 1 2 3

Project A: -$20 $5 $9 $12

Project B: -$13 $8 $7 $3

What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Project A $ million Project B $ million

What are the projects' NPVs assuming the WACC is 10%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55

. Project A $? million, Project B $ ?million

What are the projects' NPVs assuming the WACC is 15%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Project A $? million Project B $ ?million

What are the projects' IRRs assuming the WACC is 5%? Round your answer to two decimal places. Project A ?% Project B ?%

What are the projects' IRRs assuming the WACC is 10%? Round your answer to two decimal places. Project A ?% Project B ?%

What are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places. Project A ?% Project B ?%

Answer 1

1:WACC=5%

NPV A= PV of inflows- Initial investment

= 5/1.05^1 + 9/1.05^2 + 12/1.05^3 – 20 = $3.29 million

NPV B= 8/1.05^1+ 7/1.05^2 + 3/1.07^3- 13 = $3.42 million

2:WACC =10%

NPV A= PV of inflows- Initial investment

= 5/1.1^1 + 9/1.1^2 + 12/1.1^3 – 20 = $1 million

NPV B= 8/1.1^1+ 7/1.1^2 + 3/1.1^3- 13 = $2.31 million

3: WACC=15%

NPV A= PV of inflows- Initial investment

= 5/1.15^1 + 9/1.15^2 + 12/1.15^3 – 20 = $-0.96 million

NPV B= 8/1.15^1+ 7/1.15^2 + 3/1.15^3- 13 = $ 1.22 million

4: IN all scenarios of WACC, IRR is as follows

IRR A=12.46%

IRRB= 21.49%