Question
In: Finance
HW 12, Problem 1, parts a and b You are considering an investment in two projects,...
HW 12, Problem 1, parts a and b
- You are considering an investment in two projects, A and B. Birth projects will cost $115,000, and the projected cash flows are as follows:
|
Year |
Project A |
Project B |
|
1 |
$7,188 |
$51,750 |
|
2 |
21,562 |
38,812 |
|
3 |
40,250 |
28,750 |
|
4 |
50,315 |
21,563 |
|
5 |
57,500 |
14,375 |
- Assuming that the WACC is 9.4%, calculate the payback period, discounted payback period, NPV, PI, IRR and MIRR. If the projects are mutually exclusive, which project should be selected?
- Create an NPV profile chart for projects A and What is the exact crossover rate for these two projects?
Solutions
Expert Solution
As per rules I am answering the first 4 subparts of the question
| A | B | |
| Payback | 3.91 | 2.85 |
| DPB | 4.94 | 4.45 |
| NPV | 139097.42 | 137752.93 |
| PI | 1.11 | 1.09 |
Workings
| Year | Project A | Cumulative CF | DCF | Cumulative DCF | Project B | Cumulative CF | DCF | Cumulative DCF |
| 0 | -115000.00 | -115000.00 | -115000.00 | -115000.00 | -115000.00 | -115000.00 | -115000.00 | -115000.00 |
| 1 | 7188.00 | -107812.00 | 6417.86 | -108582.14 | 51750.00 | -63250.00 | 46205.36 | -68794.64 |
| 2 | 21562.00 | -86250.00 | 17189.09 | -91393.05 | 38812.00 | -24438.00 | 30940.69 | -37853.95 |
| 3 | 40250.00 | -46000.00 | 28649.15 | -62743.89 | 28750.00 | 4312.00 | 20463.68 | -17390.27 |
| 4 | 50315.00 | 4315.00 | 31976.09 | -30767.80 | 21563.00 | 25875.00 | 13703.68 | -3686.60 |
| 5 | 57500.00 | 61815.00 | 32627.04 | 1859.24 | 14375.00 | 40250.00 | 8156.76 | 4470.17 |
jeff jeffy answered 10 months agoRelated Solutions
HW 12, Problem 1, parts a and b You are considering an investment in two projects,...
HW 12, Problem 1, parts a and b
You are considering an investment in two projects, A and B.
Birth projects will cost $115,000, and the projected cash flows are
as follows:
Year
Project A
Project B
1
$7,188
$51,750
2
21,562
38,812
3
40,250
28,750
4
50,315
21,563
5
57,500
14,375
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discounted payback period, NPV, PI, IRR and MIRR. If the projects
are mutually exclusive, which project should be...
You are considering an investment in two projects, A and B. Both projects will cost $115,000,...
You are considering an investment in two projects, A and B. Both
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YEAR PROJECT A PROJECT B
1 $7,188 $51,750
2 $21,562 $38,812
3 $40,250 $28,750
4 $50,315 $21,563
5 $57,500 $14,375
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