Question

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

0

1

2

3

Project A	-$27	$13	$17	$8
Project B	-$25	$14	$11	$2

1. 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

2. 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:    %

3. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 90.37%.)

   -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 90.37%.)

   -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 90.37%.)

Answer 1

1. 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:    $7.71 million

   Project B:    $0.04 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:  $4.88 million

   Project B: -$1.68 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:  $2.42 million

   Project B: -$3.19 million

2. What are the projects' IRRs assuming the WACC is 5%? Do not round intermediate calculations. Round your answer to two decimal places.

   Project A: 20.67%

   Project B: 5.10%

   What are the projects' IRRs assuming the WACC is 10%? Do not round intermediate calculations. Round your answer to two decimal places.

   Project A: 20.67%

   Project B: 5.10%

   What are the projects' IRRs assuming the WACC is 15%? Do not round intermediate calculations. Round your answer to two decimal places.

   Project A: 20.67%

   Project B: 5.10%

3. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 90.37%.)

   Project A

   If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 90.37%.)

   Project A

   If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 90.37%.)

Project A

*IRR will not change with respect to WACC. IRR is fixed

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