Question

11-4 NPV

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

0

1

2

3

Project A	-$11	$4	$7	$1
Project B	-$20	$12	$5	$9

1. What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   Project A    $   million
   Project B    $   million

   What are the projects' NPVs assuming the WACC is 10%? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   Project A    $   million
   Project B    $   million

   What are the projects' NPVs assuming the WACC is 15%? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   Project A    $   million
   Project B    $   million

2. What are the projects' IRRs assuming the WACC is 5%? Round your answer to two decimal places. Do not round your intermediate calculations.
   Project A   %
   Project B   %

   What are the projects' IRRs assuming the WACC is 10%? Round your answer to two decimal places. Do not round your intermediate calculations.
   Project A   %
   Project B   %

   What are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places. Do not round your intermediate calculations.
   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 26.71%.)
   -Select-Project AProject BNeither A, nor B

   If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 26.71%.)
   -Select-Project AProject BNeither A, nor B

   If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 26.71%.)
   -Select-Project AProject BNeither A, nor B

NPV Your division is considering two projects with the following cash flows (in millions): Project -$11 $20 Project B $12 $5 What are the projects' NPVVS assuming the WACC is 5%? Round vour answer to two decimal places, Do not round vour intermediate calculations, Enter vour answer in millions, For example, an answer of $10.550,000 should be entered be indicated by a minus sign. Negative value million Project A Project B million WACC 10%? Round answer to two decimal places. Do not round your intermediate calculations. Enter your answer n millions. For example, an answer of $10,550,000 should be ** entered as 10,55, Negative value should be indicated by a minus sign. Project A million Project B million What are the projects' NPVS assum ing the WACC is 15% ? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered 10.55, Negative value should be indicated by a minus sian. Project A million Project B million What are the projects' IRRS assuming the WACC is 5%? Round your answer to two decimal places, Do not round your intermediate calculations. Project A Project B What are the projects' IRRS assuming the WACC is 10 %? Round your answer to two decimal places. Do not round your intermediate calculations. Project A Prolect B What are the projects' IRRS assuming the WACC is 15 % ? Round your answer to two decimal places. Do not round your intermediate calculations. % Project A Prolect B If the WACC was 5 % and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 26.71 %. ) -Select- f the WACC was 10% and and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 26.71 %. ) -Select- If the WACC was 15 % and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 26.71%. ) -Select-

Answer 1

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proiects (Autosav File Home Insert Page Layout Formulas Data Review View Add-Ins - Cut AutoSum A A Wrap Text Calibri 11 General Fill Copy A Merge & Center Conditional Format Insert Delete Format: Paste Cell Sort & Find & 2 Clear Format Painter ble Styles er Select Formatting Cells Clipboard Font Alignment Number Shules Editing BX46 BW BZ BR BS BT BU BV BX BY CA 46 (a) NPV AT 5% 47 PROJECT A PROJECT B 48 YEAR CFAT YEAR CFAT PV FACTOR@5% PV OF CFAT PV FACTOR @5% PV OF CFAT A A*B 49 A*B A 50 -11 -11 -20 1 1 20 51 0.9524 3.81 12 0.9524 1 4 1 11.43 2 52 7 0.9070 6.35 5 0,9070 4,54 3 0.8638 0.8638 53 1 0.86 7.77 0.02 NPV AT 5% = 3.74 54 NPV AT 5% = 55 56 NPV AT 10% PROJECT A PROJECT B 58 CFAT CFAT PV FACTOR @10% PV OF CFAT YEAR PV FACTOR @10% PV OF CFAT YEAR 59 -11 -20 -11 1 0 1 20 60 3.64 12 1 4 0.9091 1 0.9091 10.91 61 2 7 0.8264 5.79 2 0.8264 4.13 3 0.7513 0.7513 62 1 0.75 3 6.76 63 NPV AT 10%6 = -0.83 NPV= 1.80 LEASE STEIN indiffEPS EBIT REPLACEMENT STats NPV BETA LEVED 130% A MIRR NPV IRRREPLACEMENTS RATIOCASHBUDGET invest, EAA HPR GMAM EAC MACRS wacc BOND Re erences: P306 04:55 W AENG 2-06-2019

proiects (Autosav File Home Insert Page Layout Formulas Data Review View Add-Ins Cut Ea Copy - AutoSum A A Wrap Text Calibri 11 General Fill BI U A Merge & Center Conditional Format Insert Delete Format: Paste S % Cell Sort & Find & 2 Clear Format Painter ble Styles er Select Formatting Cells Clipboard Font Alignment Number Shules Editing BX67 Formula Bar BW BR BS BT BU BX BY BZ CA 67 68 NPV AT 15% PROJECT A 69 PROJECT B PV FACTOR @15 % PV OF CFAT CFAT CFAT 70 YEAR YEAR PV FACTOR @15% PV OF CFAT 71 -11 -20 20 -11 1 C 1 3.48 72 1 4 0.8696 1 12 0.8696 10.43 73 2 5.29 3.78 7 0.7561 5 0.7561 1 0.6575 0.6575 74 3 0.66 5.92 NPV NPV 75 -1.57 0.13 76 77 78 (b) PROJECT A PROJECT B CFAT 79 YEAR YEAR CFAT 80 -11 0 -20 12. 81 1 1 2 5 82 7 2 83 1 3 9 15.43% [ EIRR ( BX80:BX83)] 84 5.12% [EIRR(BT80:BT83) ] IRR= IRR= 85 STEIN indiffEPS EBIT REPLACEMENT STats LEASE wacc BOND BETA LEV 130% RATIOCASHBUDGET invest, EAA MIRR NPV IRRREPLACEMENT S HPR GMAM EAC MACRS NPV Re erences: P306 04:55 W AENG 2-06-2019

proiects (Autosav File Home Insert Page Layout Formulas Data Review View Add-Ins - Cut AutoSum A A Wrap Text Calibri 11 General Fill Copy A Merge & Center Conditional Format Insert Delete Format Paste BIU Cell Sort & Find & 2 Clear Format Painter ble Styles er Select Formatting Clipboard Font Alignment Number Shules Cells Editing G BR100 Formula Bar BU BW BR BS BT BX BY BZ CA AT WACC 5%, IRR = 86 87 IRR= 5.12% PROJECT A IRR = 88 15.43% PROJECT B 89 90 IRR DOES NOT CHANGE WITH CHANGE IN WACC 91 AT WACC 10% 92 IRR= 5.12% PROJECT A 93 IRR= 15.43% PROJECT B % 94 AT WACC 15 5,12% PROJECT A 95 IRR = 96 IRR 15.43% PROJECT B 97 98 99 100 101 102 103 Hinvest, EAA MIRR NPV IRRREPLACEMENTS HPR GMAM LEASE wacc BOND STEIN indiffEPS EBIT REPLACEMENT STats NPV BETA LEVE 130 % 4 EAC MACRS RATIOCASHBUDGET erences: NL295 Re 04:56 W AENG 2-06-2019

proiects (Autosav File Home Insert Page Layout Formulas Data Review View Add-Ins - Cut AutoSum A A Wrap Text Calibri 11 General Fill Copy A- Merge & Center Conditional Format Paste BIU S % Cell Insert Delete Format Sort & Find & 2 Clear Format Painter ble Styles er Select Formatting Clipboard Font Alignment Number Shules Cells Editing BX101 BQ BR BW BS BT BU BV BX BY 101 A (c ) YEAR CFAT CFAT 102 INCREMENTAL CFAT -20 103 0 -11 12 104 1 4 8 105 2 2 106 3 1 9 -8 107 CROSSOVER RATE 26.71% (=IRR(BV103:BV106)] 108 FWACC 5% 109 NPV OF B IS POSITIVE, FORA:IT IS NEGATIVE 110 PROJECT B 111 SELECT THE PROJECT WITH HIGHEST POSITIVE NPV 112 WACC 10% NPV OF B IS POSITIVE, FORA:IT IS NEGATIVE 113 PROJECT B 114 SELECT THE PROJECT WITH HIGHEST POSITIVE NPV WACC 15% 115 PROJECT B NPV OF B IS POSITIVE, FOR A: IT IS NEGATIVE 116 117 SELECT THE PROJECT WITH HIGHEST POSITIVE NPV 118 NPV BETA LEVO 130% LEASE wacc BOND STEIN indiffEPS EBIT REPLACEMENT STats invest, EAA MIRR NPV IRR REPLACEMENTS HPR GMAM EAC MACRS RATIOCASHBUDGET Re erences: NL296 04:57 W AENG 2-06-2019