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In: Finance

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of...

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years.

Calculate the two projects' NPVs, assuming a cost of capital of 12%. Do not round intermediate calculations. Round your answers to the nearest cent.

Project S: $  

Project L: $  

Which project would be selected, assuming they are mutually exclusive?

Based on the NPV values, -Select-Project SProject LItem 3 would be selected.

Calculate the two projects' IRRs. Do not round intermediate calculations. Round your answers to two decimal places.

Project S:   %

Project L:   %

Which project would be selected, assuming they are mutually exclusive?

Based on the IRR values, -Select-Project SProject LItem 6 would be selected.

Calculate the two projects' MIRRs, assuming a cost of capital of 12%. Do not round intermediate calculations. Round your answers to two decimal places.

Project S:   %

Project L:   %

Which project would be selected, assuming they are mutually exclusive?

Based on the MIRR values, -Select-Project SProject LItem 9 would be selected.

Calculate the two projects' PIs, assuming a cost of capital of 12%. Do not round intermediate calculations. Round your answers to three decimal places.

Project S:

Project L:

Which project would be selected, assuming they are mutually exclusive?

Based on the PI values, -Select-Project SProject LItem 12 would be selected.

Which project should actually be selected?

-Select-Project SProject LItem 13 should actually be selected.

Solutions

Expert Solution

Answer : Below is the sheet showing Calculation of NPV,IRR,MIRR and PI

Based On NPV Project L should be selected as it has Higher Net Present Value.

Based on IRR Project S should be selected as it has Higher IRR

Based on MIRR Project S should be selected as it has Higher MIRR.

Based on PI Project S should be selected as it has Higher PI.

In case of Conflict between IRR and NPV the project L will be selected as it has Higher Net present Value.

jeff jeffy answered 1 year ago
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