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

jeff jeffy answered 10 months ago
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