Question

eBook Problem Walk-Through Your division is considering two projects with the following cash flows (in millions): 0 1 2 3 Project A -$35 $4 $14 $20 Project B -$15 $8 $5 $4 What are the projects' NPVs assuming the WACC is 5%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A:    $   million Project B:    $   million What are the projects' NPVs assuming the WACC is 10%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A:  $   million Project B:  $   million What are the projects' NPVs assuming the WACC is 15%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A:  $   million Project B:  $   million What are the projects' IRRs assuming the WACC is 5%? Do not round intermediate calculations. Round your answer to two decimal places. Project A:    % Project B:    % What are the projects' IRRs assuming the WACC is 10%? Do not round intermediate calculations. Round your answer to two decimal places. Project A:    % Project B:    % What are the projects' IRRs assuming the WACC is 15%? Do not round intermediate calculations. Round your answer to two decimal places. Project A:    % Project B:    % If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 1.66%.) -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 1.66%.) -Select-Project AProject BNeither A nor BItem 14 If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 1.66%.) -Select-Project AProject BNeither A nor BItem 15

Answer 1

What are the projects' NPVs assuming the WACC is 5%? Project A: -$1.22 million Project B:    $0.61 million What are the projects' NPVs assuming the WACC is 10%? Project A: -$4.77 million Project B: -$0.59 million What are the projects' NPVs assuming the WACC is 15%? Project A: -$7.79 million Project B: -$1.63 million What are the projects' IRRs assuming the WACC is 5%? Do not round intermediate calculations. Round your answer to two decimal places. Project A: 3.47 % Project B: 7.45 % What are the projects' IRRs assuming the WACC is 10%? Do not round intermediate calculations. Round your answer to two decimal places. Project A:  3.47 % (it wont change) Project B: 7.45 % What are the projects' IRRs assuming the WACC is 15%? Do not round intermediate calculations. Round your answer to two decimal places. Project A: 3.47 % Project B: 7.45 % If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 1.66%.) Project B If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 1.66%.) Neither A nor B (As the NPV is negative for both projects) If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 1.66%.) Neither A nor B (As the NPV is negative for both projects)

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