Problem 11-6 NPV Your division is considering two projects with the following ca
ID: 2719132 • Letter: P
Question
Problem 11-6
NPV
Your division is considering two projects with the following cash flows (in millions):
What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A $ million
Project B $ million
What are the projects' NPVs assuming the WACC is 10%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A $ million
Project B $ million
What are the projects' NPVs assuming the WACC is 15%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A $ million
Project B $ million
What are the projects' IRRs assuming the WACC is 5%? Round your answer to two decimal places.
Project A %
Project B %
What are the projects' IRRs assuming the WACC is 10%? Round your answer to two decimal places.
Project A %
Project B %
What are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places.
Project A %
Project B %
Explanation / Answer
NPV and IRR are caluclated in Excel as per the formulas below:
NPV is calcuated as =npv(rate, value 1, value2,......Value n)
and IRR is calculated as = irr(value 1, value 2,.....Value n, [guess]) The argument guess is option ans we can just put a guess in the value or it take the guess as 0.1 (10%) and calculates the IRR
The result is as shown Below
Year Project A Project B 0 -29 -16 1 15 8 2 13 3 3 3 6 NPV at a WACC of 5% $ -0.32 $ -0.45 NPV at a WACC of 10% $ -2.15 $ -1.58 NPV at a WACC of 15% $ -3.61 $ -2.46 IRR at 5% 4.60% 3.95% IRR at 10% 6.92% 5.86% IRR at 15% 9.22% 7.78%