Question

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	$131	$131	$131	$131	$131	$131	0

A. What is each project's NPV? Round your answer to the nearest cent.

Project A:

Project B:

B. What is each project's IRR? Round your answer to two decimal places.

Project A: ______%

Project B: ______%

C. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places.

Project A: ______%

Project B: ______%

D. Construct NPV profiles for Plans A and B. Round your answers to the nearest cent.

Discount Rate	NPV Plan A	NPV Plan B
0%	$	$
5	$	$
10	$	$
12	$	$
15	$	$
18.1	$	$
23.01	$	$

E. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places.

______%

F. What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places.

Project A: _____%

Project B: _____%

Answer 1

Answer to a maximum of 4 Sub-Parts per Question.