Question
In: Finance
If these two projects are mutually exclusive, which project should the company accept based on the NPV, IRR, MIRR, payback, and discounted payback period for each project?
Considering the following projects.
Project | Year | 0 | 1 | 2 | 3 | 4 |
A | Cash flows | -$100 | $35 | $35 | $35 | $35 |
B | Cash flows | -$100 | $60 | $50 | $40 | $30 |
Project A has WACC = 6.00% while project B has WACC = 8.50%.
If these two projects are mutually exclusive, which project should the company accept based on the NPV, IRR, MIRR, payback, and discounted payback period for each project?
Would your decision (Your answer from part A) change if these two projects were independent?
Solutions
Expert Solution
B. If the two projects were independent , still I would prefer to select project B because it is having high NPV and payback period is low with low investment. there is greater possibility of high cash flows.
jeff jeffy answered 1 year agoRelated Solutions
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Please calculate the payback period, IRR, MIRR, NPV, and PI for
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project is preferable under each of the four capital budgeting
methods mentioned above:
Table 1
Cash flows for two mutually exclusive projects
Year
Investment A
Investment B
0
-$5,000,000
-5,000,000
1
$1,500,000
$1,250,000
2
$1,500,000
$1,250,000
3
$1,500,000
$1,250,000
4
$1,500,000
$1,250,000
5
$1,500,000
$1,250,000
6
$1,500,000...
Please calculate the payback period, IRR, MIRR, NPV, and PI for the following two mutually exclusive...
Please calculate the payback period, IRR, MIRR, NPV, and
PI for the following two mutually exclusive projects. The required
rate of return is 15% and the target payback is 4 years. Explain
which project is preferable under each of the four capital
budgeting methods mentioned above:
Table 1
Cash flows for two mutually exclusive
projects
Year
Investment A
Investment B
0
-$5,000,000
-5,000,000
1
$1,500,000
$1,250,000
2
$1,500,000
$1,250,000
3
$1,500,000
$1,250,000
4
$1,500,000
$1,250,000
5
$1,500,000
$1,250,000
6
$1,500,000...
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has sufficient budget
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and why? (Hint: you
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0
1
2
3
4
project Hay cash...
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PROJECT
A
t
Cash Flow
0
(150,000)
1
40,000
2
40,000
3
40,000
4
40,000
5
40,000
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1
2
3
4
Project S
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$885.37
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$15
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Project L
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$380
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