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Question 9 2 pts A company is considering two projects as shown below: Year Buffalo Bay Acorn Acres -1200 650 - 1200 200 500 300 700 The WACC for the company is 9% At what level of WACC will the both projects have the same NPV. First: Find the IRR crossover Point. [Select] Select] Find the NPV of Project Acorn or Buffalo at the cross over point

Answer 1

L7 fix IRR(L3:L6) BC 1 Acron Acres 2 year Cash flows [email protected]% Present value 0 $ (1,200.00) 1.0000 $ (1,200.00) 1 $ 650.00 0.9430 $ 612.95 2 $ 500.00 0.8892 $ 444.62 300.00 0.8386 $ 251.57 NPV $ 109.14 F G H Buffalo Bay year Cash flows [email protected]% Present value 0 $(1,200.00) 1.0000 $ (1,200.00) 1 $ 200.00 0.9430 $ 188.60 2 $ 600.00 0.8892 $ 533.55 3 $ 700.00 0.8386 $ 586.99 NPV $ 109.14 Crossover Rate year Cash flows 0 $ 1 $ 450.00 2 $ (100.00) 3 $ (400.00) 6.04%) At cross over rate both projects have the same NPV Crossover Rate 6.04% NPV at Crossover $109.14 12

H к Crossover Rate year L7 fx =IRR(L3:L6) А BC DE F i Acron Acres Buffalo Bay 2 year Cash flows [email protected]% Present value year 30 - 1200 =B3*C3 4 1 650 =C3/(1+$L$7) =B4*C4 5 2 500 =C4/(1+$L$7) =B5*C5 63 300 =C5/(1+$L$7) =B6*C6 NPV =SUM(D3:06) Cash flows [email protected]% -1200 200 =H3/(1+$L$7) 600 =H4/(1+$L$7) 700 =H5/(1+$L$7) NPV Present valuel =G3*H3 =G4*H4 =G5*H5 =G6*H6 =SUM(13:16) Cash flows =B3-G3 =B4-G4 =B5-65 =B6-G6 =IRR(L3:16) 7