Question

Your division is considering two projects with the following cash flows (in millions):

0

1

2

3

Project A	-$20	$5	$9	$12
Project B	-$13	$8	$7	$3

1. 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

2. 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:    %

   What are the projects' IRRs assuming the WACC is 15%? Do not round intermediate calculations. Round your answer to two decimal places.

   Project A:    %

   Project B:    %

3. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 3.86%.)

   -Select-Project AProject BNeither A nor BItem 13

   If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 3.86%.)

   -Select-Project AProject BNeither A nor BItem 14

   If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 3.86%.)

Answer 1

a

Project A
Discount rate	0.05
Year	0	1	2	3
Cash flow stream	-20	5	9	12
Discounting factor	1	1.05	1.1025	1.157625
Discounted cash flows project	-20	4.761905	8.163265	10.36605
NPV = Sum of discounted cash flows
NPV Project A =	3.29
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor
Project B
Discount rate	0.05
Year	0	1	2	3
Cash flow stream	-13	8	7	3
Discounting factor	1	1.05	1.1025	1.157625
Discounted cash flows project	-13	7.619048	6.349206	2.591513
NPV = Sum of discounted cash flows
NPV Project B =	3.56
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

Project A
Discount rate	0.1
Year	0	1	2	3
Cash flow stream	-20	5	9	12
Discounting factor	1	1.1	1.21	1.331
Discounted cash flows project	-20	4.545455	7.438017	9.015778
NPV = Sum of discounted cash flows
NPV Project A =	1
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor
Project B
Discount rate	0.1
Year	0	1	2	3
Cash flow stream	-13	8	7	3
Discounting factor	1	1.1	1.21	1.331
Discounted cash flows project	-13	7.272727	5.785124	2.253944
NPV = Sum of discounted cash flows
NPV Project B =	2.31
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

Project A
Discount rate	0.15
Year	0	1	2	3
Cash flow stream	-20	5	9	12
Discounting factor	1	1.15	1.3225	1.520875
Discounted cash flows project	-20	4.347826	6.805293	7.890195
NPV = Sum of discounted cash flows
NPV Project A =	-0.96
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor
Project B
Discount rate	0.15
Year	0	1	2	3
Cash flow stream	-13	8	7	3
Discounting factor	1	1.15	1.3225	1.520875
Discounted cash flows project	-13	6.956522	5.293006	1.972549
NPV = Sum of discounted cash flows
NPV Project B =	1.22
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

Please ask remaining parts seperately