Question

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 -$24,000 $8,000 $8,000 $8,000 $8,000 $8,000

Project N -$72,000 $22,400 $22,400 $22,400 $22,400 $22,400

1. 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 decimal places. Do not round your intermediate calculations.
   Project M   ______   %
   Project N    ______  %

   Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M  ______    %
   Project N    ______  %

   Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M   ______   years
   Project N   ______   years

   Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M   ______   years
   Project N   ______   years

2. Assuming the projects are independent, which one(s) would you recommen

3. If the projects are mutually exclusive, which would you recommend?

4. 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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