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%.


  1. 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?

  2. 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 2 years ago
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