Problem 11-17 Capital budgeting criteria A company has a 13% WACC and is conside

Question

Problem 11-17

Capital budgeting criteria

A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:

What is each project's NPV? Round your answer to the nearest cent.
Project A $   
Project B $  

What is each project's IRR? Round your answer to two decimal places.
Project A  %
Project B  %

What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places.
Project A  %
Project B  %

Construct NPV profiles for Plans A and B. Round your answers to the nearest cent.

Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places.
%

What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places.
Project A  %
Project B  %

0 1 2 3 4 5 6 7

Explanation / Answer

All MIRR corrected

Project A MIRR = 17.06%

NPV Project A Project B Year PV F @ 13% outflow/Inflow PV outflow/Inflow PV 0 1 -300 -300.00 -405 -405.00 1 0.88496 -387 -342.48 133 117.70 2 0.78315 -193 -151.15 133 104.16 3 0.69305 -100 -69.31 133 92.18 4 0.61332 600 367.99 133 81.57 5 0.54276 600 325.66 133 72.19 6 0.48032 850 408.27 133 63.88 7 0.42506 -180 -76.51 0 0.00 NPV 162.48 126.67 IRR(as per excel) 18.10% 23.65%

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