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A firm with a 14% WACC is evaluating two projects for this year capital budget. After-tax...

A firm with a 14% WACC is evaluating two projects for this year capital budget. After-tax cash flows, including depreciation, are as follows:

0 1 2 3 4 5

Project A -$6,000 $2,000 $2,000 $2,000 $2,000 $2,000

Project B -18,000 $5,600 $5,600   $5,600 $5,600 $5,600

a. Calculate the NPV, IRR, MIRR, payback, and discounted payback for each project.

b. Assuming the projects are independent, which one(s) would you recommend?

c. If the projects are mutually exclusive, which would you recommend?

d. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV

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Expert Solution

jeff jeffy answered 1 year ago
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