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Payback, NPV, and MIRR Your division is considering two investment projects, each of which requires an...

Payback, NPV, and MIRR

Your division is considering two investment projects, each of which requires an up-front expenditure of $22 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars):

Year Project A Project B
1 5 20
2 10 10
3 15 8
4 20 6
  1. What is the regular payback period for each of the projects? Round your answers to two decimal places.

    Project A  years

    Project B  years



  2. What is the discounted payback period for each of the projects? Round your answers to two decimal places.

    Project A  years

    Project B  years



  3. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?
    -Select-Project AProject BBoth projectsItem 5



  4. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?
    -Select-Project AProject BItem 6



  5. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
    -Select-Project AProject BItem 7



  6. What is the crossover rate? Round your answer to two decimal places.
    %



  7. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.

    Project A  %

    Project B  %

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