Question

A company is analyzing two mutually exclusive projects, S and L, with the following cash flows:...

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.

Homework Answers

Answer #1

Project that has higher NPV adds higher value to shareholders and hence is a better firm.

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