Question

A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 0 1 2 3 4 5 Project M -$27,000 $9,000 $9,000 $9,000 $9,000 $9,000 Project N -$81,000 $25,200 $25,200 $25,200 $25,200 $25,200 Calculate NPV for each project. Do not round intermediate calculations. Round your answers to the nearest cent. Project M: $ Project N: $ Calculate IRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: % Project N: % Calculate MIRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: % Project N: % Calculate payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: years Project N: years Calculate discounted payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: years Project N: years Assuming the projects are independent, which one(s) would you recommend? If the projects are mutually exclusive, which would you recommend? Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?

Answer #1

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A firm with a 14% WACC is evaluating two projects for this
year's capital budget. After-tax cash flows, including
depreciation, are as follows:
0
1
2
3
4
5
Project M
-$9,000
$3,000
$3,000
$3,000
$3,000
$3,000
Project N
-$27,000
$8,400
$8,400
$8,400
$8,400
$8,400
Calculate NPV for each project. Do not round intermediate
calculations. Round your answers to the nearest cent.
Project M: $
Project N: $
Calculate IRR for each project. Do not round intermediate
calculations. Round your answers to...

CAPITAL BUDGETING CRITERIA
A firm with a 13% WACC is evaluating two projects for this
year's capital budget. After-tax cash flows, including
depreciation, are as follows:
0
1
2
3
4
5
Project M
-$27,000
$9,000
$9,000
$9,000
$9,000
$9,000
Project N
-$81,000
$25,200
$25,200
$25,200
$25,200
$25,200
Calculate NPV for each project. Round your answers to the
nearest cent. Do not round your intermediate calculations.
Project M $
Project N $
Calculate IRR for each project. Round your answers to two...

CAPITAL BUDGETING CRITERIA
A firm with a 14% WACC is evaluating two projects for this
year's capital budget. After-tax cash flows, including
depreciation, are as follows:
0
1
2
3
4
5
Project M
-$18,000
$6,000
$6,000
$6,000
$6,000
$6,000
Project N
-$54,000
$16,800
$16,800
$16,800
$16,800
$16,800
Calculate NPV for each project. Round your answers to the
nearest cent. Do not round your intermediate calculations.
Project M $
Project N $
Calculate IRR for each project. Round your answers to two...

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
$135
$135
$135
$135
$135
$135
$0
What is each project's NPV? Negative values, if any, should be
indicated by a minus sign. Do not round intermediate calculations.
Round your answers to the nearest cent.
Project A:...

Consider the following cash flows of two mutually exclusive
projects for A–Z Motorcars. Assume the discount rate for both
projects is 12 percent. Year AZM Mini-SUV AZF Full-SUV 0 –$ 525,000
–$ 875,000 1 335,000 365,000 2 210,000 450,000 3 165,000 305,000 a.
What is the payback period for each project? (Do not round
intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.) Payback period AZM Mini-SUV years AZF
Full-SUV years b. What is the NPV for...

Question 1.
Bigg company is evaluating two projects for next year’s capital
budget. The after-tax cash flows (including depreciation) for each
project are the following:
Project A
Project B
Year 0
-6,000
-18,000
Year 1
2,000
5,600
Year 2
2,000
5,600
Year 3
2,000
5,600
Year 4
2,000
5,600
Year 5
2,000
5,600
Year 6
4,000
9,000
a.) If the company’s WACC is 14%, find the NPV,
IRR, payback, and discount payback for each project.
b.) If the projects are...

Consider the following two mutually exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
0
–$40,000
–$180,000
1
25,000
15,000
2
22,000
45,000
3
20,000
50,000
4
15,000
275,000
The required return on these investments is 11 percent.
Required:
(a)
What is the payback period for each project?
(Do not round intermediate
calculations. Round your answers to 2 decimal
places (e.g., 32.16).)
Payback period
Project A
years
Project B
years ...

A company has a 13% 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
-$405
$134
$134
$134
$134
$134
$134
$0
The data has been collected in the Microsoft Excel Online file
below. Open the spreadsheet and perform the required analysis to
answer the questions below.
Open spreadsheet
What is each...

Crane Corp. management is evaluating two mutually exclusive
projects. The cost of capital is 15 percent. Costs and cash flows
for each project are given in the following table.
Year
Project 1
Project 2
0
-$1,292,224
-$1,321,796
1
238,000
384,000
2
329,000
384,000
3
430,000
384,000
4
504,000
384,000
5
800,000
384,000
Calculate NPV and IRR of two projects. (Enter negative
amounts using negative sign, e.g. -45.25. Do not round discount
factors. Round other intermediate calculations and final answer to...

Bellinger Industries is considering two projects for inclusion
in its capital budget, and you have been asked to do the analysis.
Both projects' after-tax cash flows are shown on the time line
below. Depreciation, salvage values, net operating working capital
requirements, and tax effects are all included in these cash flows.
Both projects have 4-year lives, and they have risk characteristics
similar to the firm's average project. Bellinger's WACC is 11%.
0
1
2
3
4
Project A
-1,050
650...

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