Question

Your division is considering two projects with the following cash flows (in millions): Iw $4 Project A Project B -$11 - $20 $12 $5 a. What are the projects' NPVs assuming the WACC is 5%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A: $ million Project B: $ million What are the projects' NPVs assuming the WACC is 10%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A: $ million Project B: $ million What are the projects' NPVs assuming the WACC is 15%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A: $ million Project B: $ million b. What are the projects' IRRs assuming the WACC is 5%? Do not round intermediate calculations. Round your answer to two decimal places. Project A: Project B: What are the projects' IRRs assuming the WACC is 10%? Do not round intermediate calculations. Round your answer to two decimal places. Project A: Project B: %

Answer 1

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projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins - 2x % Cut Σ AutoSum : A Calibri 11 AA = = = pt Wrap Text General Fill 2 E Copy m Paste A Merge & Center - BIU - D $ % , :.: Conditional Format Cell Insert Delete Format Sort & Find & Format Painter Formatting as Table Styles Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing BX46 BR BS BT BU B V BW BX BY BZ 46 (a) NPV AT 5% 47 PROJECT A PROJECT B 48 YEAR CFAT PV FACTOR @5% PV OF CFAT YEAR CFAT PV FACTOR @5% PV OF CFAT 49 A B A*B A*B 0 -11 1 -20 51 14 0.9524 3.81 0.9524 11.43 52 0.9070 6.35 0.9070 4.54 53 0.8638 0.86 0.8638 7.77 54 NPV AT 5% = 0.02 NPV AT 5% = 55 50 -11 -20 on m 3.74 YEAR 57 58 59 60 -11 0 NPV AT 10% PROJECT A PROJECT B YEAR CFAT P V FACTOR @10% PV OF CFAT -11 4 0.9091 3.64 0.8264 5.79 0.7513 NPV AT 10% = -0.83 MI-np-ir REPLACEMENTS HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT ferences: E147 12 5 61 7 62 0.75 CFAT PV FACTOR @10% PV OF CFAT -20 -20 0.9091 10.91 0.8264 4.13 0.7513 NPV = 1.80 BOND OPTION TO WAITSTEIN indiffEPS EBIT LEASE STRAIGHT LINE GOLFO BOJ 130% 0 L . .. * ENG 0834 28-11-2019 6.76 63 H N Red

projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins File Home Insert Page Layout Formulas - 2x % Cut Calibri 11 pt General AA = = = A Wrap Text Merge & Center - BIU - D $ % , :.: Cell Styles Insert Delete Format Conditional Format Formatting as Table Styles E Copy Paste Format Painter Clipboard BX84 BR Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select Font Alignment Number Cells BS BT BU BV BW BX BY BZ 67 NPV AT 15% PROJECT A PROJECT B YEAR CFAT YEAR CFAT 68 69 70 71 72 73 PV FACTOR @ 15% -20 O -11 1 PV FACTOR @15% PV OF CFAT -11 4 0.8696 0.7561 1 0.6575 3.48 PV OF CFAT -20 0.8696 10.43 0.7561 3.78 0.6575 5.92 N 5.29 5 74 0.66 w 75 NPV = -1.57 NPV = 0.13 76 77 (b) PROJECT B PROJECT A YEAR 78 YEAR CFAT -11 CFAT -20 1 12 79 80 81 82 83 84 IRR = 5.12% (=IRR(BT80:BT83)] IRR = 15.43% (=IRR(BX80:BX83)] ATWAA En Inn MI-np-ir REPLACEMENTS HPR GMAM ferences: E147 EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT BOND OPTION TO WAITSTEIN indiffEPS EBIT LEASE STRAIGHT LINE BOJ 130% GOLAU - Red O- D O 9 * 4 O ENG 28-11-2019

projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins Formulas - 2x Σ AutoSum : A 11 pt General AA = = = A Wrap Text Merge Merge & Center - Center SF $ % % , 4:0 .00 :.: Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Fill 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells File Home Insert Page Layout % Cut Calibri E Copy Paste Format Painter BIU - D Clipboard Font BY77 BR BS 77 (b) PROJECT A YEAR 79 80 81 BT BU B V BX BY BZ BW PROJECT B 78 YEAR CFAT -11 CFAT -20 w No 12 5 IRR = 5.12% (=IRR(BT80:BT83)] IRR = 15.43% (=IRR(BX80:BX83)] 83 84 85 86 87 88 89 90 91 AT WACC = 5%, IRR = IRR = 5.12% PROJECT A IRR = 15.43% PROJECT B IRR DOES NOT CHANGE WITH CHANGE IN WACC AT WACC =10% IRR = 5.12% PROJECT A IRR = 15.43% PROJECT B 92 93 94 95 AT WACC =15% IRR = IRR = 5.12% PROJECT A 15.43% PROJECT B H N HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT BOND OPTION TO WAITSTEIN indiffEPS EBIT MI-np-ir REPLACEMENTS ferences: E147 LEASE STRAIGHT LINE BOI 130% GOLFO Red 0 ...B 199 * 4 ENG 28-11-2019

projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins Formulas - 2x 11 A = = V General A A = E Wrap Text Merge Merge & Center Center m Find & SF $ - % % 4:0 .00 8. Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill 2 Sort & 2 Clear Filter Editing Select Alignment Number Cells File Home Insert Page Layout % Cut Calibri Ea Copy Paste B I U D Format Painter Clipboard Font BX103 - Fax BQ 101 102 103 BR BS BU BV BW BX BY (c) YEAR BT А CEAT 0 В CEAT -11 INCREMENTAL CFAT -20 12 104 105 106 on. 107 CROSSOVER RATE 26.71% [EIRR(BV103:BV106)] 108 109 110 111 IF WACC=5% PROJECT B SELECT SELECT THE PROJECT WITH HIGHEST POSITIVE NPV WACC < CROSSOVER RATE 112 113 114 IF WACC=10% PROJECT B SELECT SELECT THE PROJECT WITH HIGHEST POSITIVE NPV WACC < CROSSOVER RATE 115 116 117 118 N Red SELECT HPR GMAM IF WACC=15% PROJECT B EAC MACRS NPV SELECT THE PROJECT WITH HIGHEST POSITIVE NPV WACC < CROSSOVER RATE BETA LEVERED REPLACEMENT BOND OPTION TO WAIT STEIN indiffEPS EBIT I RELEVANT MI-np-ir REPLACEMENT S ferences: NL296 GOLFI < 0 0 + LEASE STRAIGHT LINE BOJ 130% 19 . * 2. B ENG 28-11-2019