Question
In: Finance
Calculate the five different criteria for evaluating projects (regular payback, discounted payback, NPV, IRR, and MIRR)...
Calculate the five different criteria for evaluating projects
(regular payback,
discounted payback, NPV, IRR, and MIRR) for the two projects listed
below. The firm’s
WACC is 9.90%. If the projects are mutually exclusive and the firm
has sufficient budget
available, which project (if any) would you choose to proceed with,
and why? (Hint: you
may want to create the full cash flow table for each project to
fully show your work.)
| periods | 0 | 1 | 2 | 3 | 4 |
| project Hay cash flows | -45,000 | 17,000 | 16,000 | 15,000 | 25,000 |
| project Bee cash flows | -50,000 | 11,000 | 30,000 | 15,000 | 25,000 |
Solutions
Expert Solution
Cash flows are as below
| periods | 0 | 1 | 2 | 3 | 4 |
| project Hay cash flows | -45000 | 17000 | 16000 | 15000 | 25000 |
| Cumulative CF | -45000 | -28000 | -12000 | 3000 | 28000 |
| DCF | -45000 | 15468.61 | 13247.22 | 11300.51 | 17137.57 |
| Cumulative CF | -45000 | -29531.4 | -16284.2 | -4983.66 | 12153.91 |
| Project Bee cash flows | -50000 | 11000 | 30000 | 15000 | 25000 |
| Cumulative CF | -50000 | -39000 | -9000 | 6000 | 31000 |
| DCF | -50000 | 10009.1 | 24838.53 | 11300.51 | 17137.57 |
| Cumulative CF | -50000 | -39990.9 | -15152.4 | -3851.86 | 13285.71 |
The indicators are as follows
| Payback | Discounted Payback | NPV | IRR | MIRR | |
| Project Hay | 2.8 | 3.29 | 12153.91 | 21.12% | 16.67% |
| Project Bee | 2.7 | 3.22 | 13285.71 | 20.72% | 16.57% |
WORKINGS
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--------------------------------------------------------------
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