Question

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

0

1

2

3

Project A	-$27	$13	$17	$8
Project B	-$25	$14	$11	$2

1. What are the projects' NPVs assuming the WACC is 5%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places.

   Project A:    $   million

   Project B:    $   million

   What are the projects' NPVs assuming the WACC is 10%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places.

   Project A:  $   million

   Project B:  $   million

   What are the projects' NPVs assuming the WACC is 15%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places.

   Project A:  $   million

   Project B:  $   million

2. What are the projects' IRRs assuming the WACC is 5%? Do not round intermediate calculations. Round your answer to two decimal places.

   Project A:    %

   Project B:    %

   What are the projects' IRRs assuming the WACC is 10%? Do not round intermediate calculations. Round your answer to two decimal places.

   Project A:    %

   Project B:    %

   What are the projects' IRRs assuming the WACC is 15%? Do not round intermediate calculations. Round your answer to two decimal places.

   Project A:    %

   Project B:    %

3. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 90.37%.)

   -Select-Project AProject BNeither A nor BItem 13

   If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 90.37%.)

   -Select-Project AProject BNeither A nor BItem 14

   If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 90.37%.)

   -Select-Project AProject BNeither A nor BItem 15

Answer 1

1.
=NPV(5%,{-27;13;17;8})*(1+5%)=7.71115430299103

2.
=NPV(5%,{-25;14;11;2})*(1+5%)=0.0383327934348328

3.
=NPV(10%,{-27;13;17;8})*(1+10%)=4.87828700225394

4.
=NPV(10%,{-25;14;11;2})*(1+10%)=-1.67918858001503

5.
=NPV(15%,{-27;13;17;8})*(1+15%)=2.41892002958823

6.
=NPV(15%,{-25;14;11;2})*(1+15%)=-3.19347415139311

7.
=IRR({-27;13;17;8})=20.6723919032408%

8.
=IRR({-25;14;11;2})=5.10476830994324%

9.
=IRR({-27;13;17;8})=20.6723919032408%

10.
=IRR({-25;14;11;2})=5.10476830994324%

11.
=IRR({-27;13;17;8})=20.6723919032408%

12.
=IRR({-25;14;11;2})=5.10476830994324%

13.
Project A

14.
Project A

15.
Project A