Question

# Your firm is considering two projects with the following cash flows. WACC 6% 6% year...

 Your firm is considering two projects with the following cash flows. WACC 6% 6% year Project A Project B 0 -55,000 -70,000 1 10,000 10,000 2 9,000 10,000 3 8,000 10,000 4 7,500 10,000 5 7,500 10,000 6 7,500 10,000 7 7,500 10,000 8 7,500 12,000 a. Calculate NPV and IRR for both projects NPV IRR b. Do the following 2 questions (b-1 and b-2) on sheet 3 and change the name from Sheet 3 to "Datatable NPV IRR" b-1. Calculate various of NPV with "date table" for project A and Project B respectively. Use the following information: WACC: 1%, 2%, 3%, 4%, 5%, 6%, and 7%,The initial invest of project A: 35,000, 45,000, 55,000, 65,000, 75,000, 85,000. The initial investment of project B: 40,000, 50,000, 60,000, 70,000, 80,000, 90,000 . (To help you, I have create a template in Sheet 3) b-2 Use the above information of initial investment to create data tables of IRRs for Project A and project B respectively.

 Answer a Calculation of NPV Year Discount factor @ 6% Project A Project A Cash flow Present Values Cash flow Present Values 0 1 -\$55,000 -\$55,000 -\$70,000 -\$70,000 1 0.943396 \$10,000 \$9,434 \$10,000 \$9,434 2 0.889996 \$9,000 \$8,010 \$10,000 \$8,900 3 0.839619 \$8,000 \$6,717 \$10,000 \$8,396 4 0.792094 \$7,500 \$5,941 \$10,000 \$7,921 5 0.747258 \$7,500 \$5,604 \$10,000 \$7,473 6 0.704961 \$7,500 \$5,287 \$10,000 \$7,050 7 0.665057 \$7,500 \$4,988 \$10,000 \$6,651 8 0.627412 \$7,500 \$4,706 \$12,000 \$7,529 NPV -\$4,313 -\$6,647 NPV of Project A -\$4,313 NPV of Project B -\$6,647 Calculation of IRR At IRR , NPV of project is equal to zero. IRR of Project A 3.88% IRR of Project B 3.59%

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