Question

o Relum (TR the book Mood Internal Rate of Return (MIR) ) Click here to read the book: Payback Period CAPITAL BUDGETING CRITERIA Afirm with a 14%. WACC is evaluating two projects for this year's capital budget hows, including Project M Project N 530,000 $10,000 $10,000 $10,000 $10,000 $10,000 -390,000 $28,000 $28,000 $28,000 $28,000 $28,000 3. Calculate NPV for each project. Round your answers to the nearest cent. De Project M $ Project NS tround your intermediate actions Calculate TR for each project. Round your answers to two decimal places. Do not round your Project M Project N mediate actions Calculate MIRR for each project. Round your answers to two decimal places. Do not found your intermediate actions Project M Project N Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate action Project M Project N Calculate discounted payback for each project. Round your answers to two decimal places. Do not found your intermediate calculations Project M years Project N b. Assuming the protects are independent, which would recommend c. If the projects are mutually exclusive, which would you recommend and IRRY d. Notice that the projects have the same cash flow timing pattern. Why is there a cont between Cow hout in

Answer 1

rate positively .. formula as per pic..

						Cumulative cash flow	Discounted cash flow	Cumulative discounted cash flow
	Year	A	B	Delta	PVIF @ 14%	A	B	A	B	A	B
	0	-30000	-90000	60000	1	(30,000.00)	(90,000.00)	(30,000.00)	(90,000.00)	(30,000.00)	(90,000.00)
	1	10000	28000	-18000	0.877192982	(20,000.00)	(62,000.00)	8,771.93	24,561.40	(21,228.07)	(65,438.60)
	2	10000	28000	-18000	0.769467528	(10,000.00)	(34,000.00)	7,694.68	21,545.09	(13,533.39)	(43,893.51)
	3	10000	28000	-18000	0.674971516	-	(6,000.00)	6,749.72	18,899.20	(6,783.68)	(24,994.30)
	4	10000	28000	-18000	0.592080277	10,000.00	22,000.00	5,920.80	16,578.25	(862.88)	(8,416.06)
	5	10000	28000	-18000	0.519368664	20,000.00	50,000.00	5,193.69	14,542.32	4,330.81	6,126.27
								4,330.81	6,126.27	8,661.62	12,252.53
	NPV A	4,330.81
	NPV B	6,126.27
	IRR A	19.86%
	IRR B	16.80%
	MIRR A	17.12%
	MIRR B	15.51%
	Payback A	3.00	year
	Payback B	3.21	year
	Disc Payback A	4.17	year
	Disc Payback B	4.58	year
	Since, both project has positive NPV and IRR is greater than zero. Therefore both the project should be accepted.
	If the projects are mutually exclusive project with higher NPV means project B should be accepted
	There is conflice between IRR and NPV due to size of cash flow, means cost for the projects are different.