Question

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

                      0   1      2     3

Project A - $16   $7    $9 $10

Project B - $26   $14 $20 $11

a. What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. 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. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be inidcated 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. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be inidcated by a minus sign.

Project A $ _______ million

Project B $ _______ million

b. What are the projects' IRRs assuming the WACC is 5%? Round your answer to two decimal places.

Project A ________%

Project B ________%

What are the projects' IRRs assuming the WACC is 10%? Round your answer to two decimal places.

Project A _______%

Project B _______%

What are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places.

Project A _______%

Project B _______%

c. If the WACC were 5% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 48.57%.) _____________________

If the WACC were 10% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 48.57%.) ________________________

If the WACC were 15% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 48.57%.) ___________________

Answer 1