Question

R X Verdana BI Insert ** Delete. Σ' Α Paste 12 AA = = = y Wrap Text General D U B A 333 Merge & Center $ . % Conditional Formatting as Table Styles A company has a 11% WACC and is considering two mutually exclusive investments that cannot be repeated) with the following cash flows: O O Sor Format - . Filt A1 x fx A company has a 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: Project A Project B ($400) $132 $132 $132 $132 $132 $132 so 13 a. What is each project's NPV? Round your answer to the nearest cent. 14 b. What is each project's IRR? Round your answer to two decimal places. 15 c. What is each project's MIRR? 16 d. From your answers to parts a-c, which project would be selected? Explain. e. If the WACC was 18%, which project would be selected? What would the difference in value 17 created by the two projects be for a WACC of 18%? f. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two 18 decimal places. 19 g. Explain the role played by the crossover rate in capital budgeting decisions.

Answer 1

As per rules I am answering the first 4 subparts of the question

a	NPV
	project A	240.64
	Project B	158.43
b	IRR
	project A	18.10%
	Project B	23.86%
c	MIRR
	project A	14.59%
	Project B	16.42%

d: Project A will be selected since NPV is higher even though its IRR and MIRR is lesser than project B.

Workings

Book1- Excel AutoSave Off Sign in Co View O Tell me what you want to do File Review Help Share Home Insert Draw Page Layout Formulas Data Insert A^ A Calibri General 11 Delete Conditional Format as Cell Sort & Find & Paste В I U Format Filter Select Styles Formatting Table Clipboard Alignment Number Styles Cells Editing Font fix A2 A В C F Н J К L 1 Year 2 0 1 2 3 4 5 6 7 project A -300 -387-193 -100 600 600 850 -180 4 Project B -400 132 132 132 132 132 1320 5 6 1 NPV project A NPV(11%,D3:J3)+C3 Project B -NPV(11%,D4:J4)+C4 7 9 10 2 IRR project A IRR(C3:J3) Project B IRR(C4:14) 11 12 13 14 3 MIRR project A MIRR(C3:J3,11%,11%) Project B MIRR(C4:J4,11%,11%) 15 16 17 M