Question

Year	Project A	Project B
0	-$150,000	-$150,000
1	8,000	80,000
2	30,000	40,000
3	45,000	35,000
4	55,000	25,000
5	85,000	20,000

At what WACC would there be a break-even between the two projects?

1. 7.23%
2. 8.48%
3. 7.57%
4. 7.89%
5. What is the NPV for Project A assuming the WACC is 10%?
   1. $5,653.94
   2. $10,522.64
   3. $6,219.33
   4. $11,574.90
6. What is the IRR for Project B?
   1. 11.2%
   2. 13.9%
   3. 11.6%
   4. 10.9%

3. What is the discounted payback period of Project A assuming the WACC is 10%?
   1. 4.1 years
   2. 5.5 years
   3. 5.1 years
   4. 4.9 years

Answer 1

	Year	Project A	Project B	PVIF @10%	present value A	Cumulative discounted cash flow
	0	($150,000)	($150,000)	1	($150,000)	($150,000)
	1	8,000	80,000	0.909091	$7,273	($142,727)
	2	30,000	40,000	0.826446	$24,793	($117,934)
	3	45,000	35,000	0.751315	$33,809	($84,125)
	4	55,000	25,000	0.683013	$37,566	($46,559)
	5	85,000	20,000	0.620921	$52,778	$6,219
ans a)		Project A	Project B
	NPV @ 7.23%	$21,606.06	$20,797.52
	NPV @ 8.48%%	$14,414.89	$16,519.83
	NPV @ 7.57%	$19,607.80	$19,614.34
	NPV @ 7.89%	$17,756.26	$18,514.31
	We can see at 7.57% rate both the project has almost same NPV.
	therefore answer = option C) 7.57%.
ans b)	NPV @ 10%	$6,219.33				ans is option c)
ans c)	IRR of project B		13.9%			answer is option b
ans d)	Discounted paybackperiod of A =	4+46559/52778		4.9	year	ans is option d)