Homework Answers
a:
| Project P | Project Q | |
| NPV | 3494.48 | 7080.47 |
| IRR | 11.15% | 10.55% |
| MIRR | 9.69% | 9.37% |
| Payback | 4.21 | 4.29 |
b: If they are independent, select Both since both have positive NPVs
If they are mutually exclusive select Q since it has higher NPV.
Workings
| Year | Project P | Cumulative CF | Project Q | Cumulative CF |
| 0 | -35800 | -35800 | -90000 | -90000 |
| 1 | 8500 | -27300 | 21000 | -69000 |
| 2 | 8500 | -18800 | 21000 | -48000 |
| 3 | 8500 | -10300 | 21000 | -27000 |
| 4 | 8500 | -1800 | 21000 | -6000 |
| 5 | 8500 | 6700 | 21000 | 15000 |
| 6 | 8500 | 15200 | 21000 | 36000 |
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Must be completed using financial formulas, NO EXCEL.
a. Calculate the NPV, IRR, MIRR, and traditional payback period
for each project, assuming a required rate of return of 8%.
b. If the projects are independent, which project(s) should be
selected? If they are mutually exclusive, which project should be
selected?
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