Question

Your division is considering two projects with the following cash flows (in millions): $13 Project A -$29 $15 $3 Project B -$16 $8 $3 $6 %24

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

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 5.9%.)

   -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 5.9%.)

   -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 5.9%.
   )

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

- 2x AutoSum" A Fill ZI TU 2 Clear Sort & Filter Editing Find & Select BZ CA 5 projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut ) Ex Calibri 11 A A = = = V Wrap Text General E Copy Paste BI U D- DA SF Merge Merge & Center - Center $ % % , 4:0 .00 :.: Format Painter Conditional Format Cell Insert Delete Format Formatting as Table Styles Clipboard Font Alignment CD Number Styles Cells BX45 2 BR BS BT BU B V BW BX BY 45 46 (a) NPV AT 5% 47 PROJECT A PROJECT B 48 YEAR CFAT PV FACTOR @5% PV OF CFAT YEAR CFAT PV FACTOR @5% 49 A B A*B 50 -29 1 -29 51 15 0.9524 14.29 52 2 13 0.9070 11.79 0.8638 2.59 NPV AT 5% = -0.33 NPV AT 5% = -16 w NE a wc PV OF CFAT A*B 1 -16 0.9524 7.62 0.9070 2.72 0.8638 5.18 -0.48 53 NPV AT 10% PROJECT A YEAR CFAT PV FACTOR @10% 0 PROJECT B CFAT PV FACTOR @10% PV OF CFAT YEAR -29 -29 15 0.9091 13.64 0.8264 10.74 0.7513 2.25 NPV AT 10% = -2.37 -16 8 60 61 PV OF CFAT -16 0.9091 7.27 0.8264 2.48 0.7513 4.51 -1.74 13 62 NPV = 63 64 H invest, EAA MI-np-ir REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED I RRnpvbeta RATION PBP ARR ferences: SM219 Rea REPLACEMENT BOND OPTION TO WAITSTEIN III |00| 120% - ... * * ENG 05-12-2019

projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins File Home Insert Page Layout Formulas - 2x % Cut Σ AutoSum : A Calibri A = = = V General 11 A D- DA Wrap Text Merge Merge & Center - Center BI U SF $ 4:0 .00 :.: Insert Delete Format % % , Number Conditional Format Formatting as Table Styles Cell Styles Fill 2 Clear Sort & Filter Editing Find & Select Font Alignment Cells E Copy Paste Format Painter Clipboard BX85 BR 66 BS BT BU B V BW BX BY BZ СА Е NPV AT 15% PROJECT A YEAR CFAT CFAT PV FACTOR @15% PROJECT B PV FACTOR @15% PV OF CFAT YEAR -29 -29 15 0.8696 13.04 13 0.7561 9.83 0.6575 1.97 1 2 a wc PV OF CFAT -16 0.8696 6.96 0.7561 2.27 0.6575 3.95 NPV = -4.15 NPV = -2.83 PROJECT B 76 77 (b) 78 79 80 PROJECT A YEAR CFAT YEAR CFAT -16 8 81 3 N w IRR = 4.25% (=IRR(BT80:BT83)] IRR = 3.30% (=IRR(BX80:BX83)] 82 83 84 85 H AT WACC = 5%, IRR = I RRnpvbeta RATION PBP ARR invest, EAA ferences: SM219 MI-np-ir REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED Rea REPLACEMENT BOND OPTION TO WAITSTEIN III BO! 120% - ... * * ENG 05-12-2019

projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins File Home Insert Page Layout Formulas - 2x % Cut Σ AutoSum : A 4:0 .00 . Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Fill 2 Clear Sort & Filter Editing Find & Select Cells BX BY BZ СА Е YEAR CFAT -16 w NEO 3.30% (=IRR(BX80:BX83)] Calibri 11 A A = = = V Wrap Text General E Copy Paste B I U B- Format Painter SF A Merge Merge & Center - Center $ -% % Clipboard Font Alignment Number BX96 BR BS BT BU B V BW 77 (b) PROJECT A PROJECT B 78 YEAR CFAT 79 -29 80 15 81 13 82 83 IRR = 4.25% (=IRR(BT80:BT83)] IRR = 84 85 AT WACC = 5%, IRR = 86 IRR = 4.25% PROJECT A 87 IRR = 3.30% PROJECT B 88 IRR DOES NOT CHANGE WITH CHANGE IN WACC 89 AT WACC = 10% IRR = 4.25% PROJECT A IRR = 3.30% PROJECT B 92 AT WACC =15% 93 IRR = 4.25% PROJECT A 94 IRR = 3.30% PROJECT B 95 96 90 91 I N IRRnpvbeta RATION PBP ARR ferences: SM219 invest, EAA MI-np-ir REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT BOND OPTION TO WAITSTEIN id < BOU 120% D- 0 Rea DOER 9 * * OENG 05-12-2019)

projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins File Home Insert Page Layout Formulas - 2x % Cut Calibri A = = = V General 11 B- A A Wrap Text Merge Merge & Center - Center Σ AutoSum : A Fill 2 m Sort & Find & B I U SF $ -% % 4:0 .00 . Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles 2 Clear Filter Editing Select Font Alignment Number Cells fx E Copy Paste Format Painter Clipboard BV100 - BQ 100 101 102 103 BR BS BT BU B V BW BX BY А CFAT YEAR в CFAT -29 158 INCREMENTAL CFAT -13 -16 0 1 104 có 13 3 10 0 105 106 107 108 CROSSOVER RATE 5.90% [=IRR(BV103:BV106)] 109 IF WACC=5% NONE SELECT SELECT THE PROJECT WITH HIGHEST POSITIVE NPV 110 111 112 113 IF WACC=10% NONE SELECT SELECT THE PROJECT WITH HIGHEST POSITIVE NPV 114 115 116 117 118 119 IF WACC=15% SELECT THE PROJECT WITH HIGHEST POSITIVE NPV SELECT NONE H I RRnpvbeta RATION PBP ARR ferences: SM219 invest, EAA MI-np-ir REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED Rea REPLACEMENT BOND OPTION TO WAITSTEIN III BOU 120% ... * * ENG 05-12-2019