Question

h 11: End-of-Chapter Problems - The Basics of Capital Budgeting Your division is considering two projects with the following cash flows (in millions): Project A Project B -$17 -$26 $8 $10 a. What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. Do not round your intermediate millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign. Project A $ million Project B $ million What are the projects' NPVs assuming the WACC is 10%? Round your answer to two decimal places. Do not round your intermediat millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign Project A $ million Project B $ million What are the projects' NPVs assuming the WACC is 15%? Round your answer to two decimal places. Do not round your intermediat millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign. Project A $ million Project B $ million b. What are the projects' IRRs assuming the WACC is 5%? Round your answer to two decimal places. Do not round your intermediate Project A Project B What are the projects' IRRs assuming the WACC is 10%? Round your answer to two decimal places. Do not round your intermedia Project A Project B What are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places. Do not round your intermedia Project A

Answer 1

Year	A	B
0	-17	-26
1	8	13
2	8	10
3	3	9
NPV (5%)	$0.47	$3.23	Select B
NPV (10%)	($0.86)	$0.84	Select B
NPV (15%)	($2.02)	($1.22)	Select B
IRR	6.68%	11.96%

NPV and IRR can be calculated using the same function on a calculator

Insert Cash flows (CF) and I/Y = WACC, then compute NPV

IRR remains the same irrespective of WACC.

Select Projects with higher NPVs, which is Project B for all WACCs.