A company is analyzing two mutually exclusive projects, S and L, with the following cash flows:
0 | 1 | 2 | 3 | 4 |
Project S | -$1,000 | $874.66 | $260 | $5 | $10 |
Project L | -$1,000 | $5 | $240 | $380 | $797.82 |
The company's WACC is 10.0%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places.
A firm is considering two mutually exclusive projects, X and Y, with the following cash flows:
0 | 1 | 2 | 3 | 4 |
Project X | -$1,000 | $100 | $280 | $370 | $750 |
Project Y | -$1,000 | $900 | $100 | $55 | $55 |
The projects are equally risky, and their WACC is 9%. What is the MIRR of the project that maximizes shareholder value? Do not round intermediate calculations. Round your answer to two decimal places.
Project that has higher NPV adds higher value to shareholders and hence is a better firm.
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