Question

NPV

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

0

1

2

3

Project A	-$29	$15	$13	$3
Project B	-$16	$8	$3	$6

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

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

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

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

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

   What are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places. Do not round your intermediate calculations.
   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 5.9%.)
   -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 5.9%.)
   -Select

4. -Project A

5. Project B

6. Neither A, nor B

7. If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 5.9%.)
   -Select-

8. Project A

9. Project B

10. Neither A, nor B

Answer 1

Calculation of NPV

1.1) Npv of project @5%

     A) -0.33 million

    B) -0.48 million

1.2)NPV OF PROJECT @10%

A) -2.03 MILLION

B) - 1.06 MILLION

1.3) NPV OF PROJECT @15%

A)-4.14 million

B) -2.83 million

2.1) calculation of IRR

for project A

Let assume IRR be 4% than npv is 0.109 million

If we assume IRR be 5% than npv of is -0.33 million

IRR = lr+{ npv lr/(npv lr - npv hr)}*(rate spread)

=4+{.109/(.109+.33)}(5-4)

IRR =4.25%

Project B

Npv at 4 % =- 0.2

Npv at 3 % = 0.086

IRR =3+{.086/(.086+.2)}*1

IRR =3.3%

If A and b mutually exclusive project if wacc is either 5,10 or 15 % i rejected both project because IRR is less than wacc of both project.

So I would nither select A nor B