Capital budgeting criteria A firm with a 14% WACC is evaluating two projects for

Question

Capital budgeting criteria

A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:

Calculate NPV for each project. Round your answers to the nearest cent.
Project A    $    
Project B    $   

Calculate IRR for each project. Round your answers to two decimal places.
Project A      %
Project B      %

Calculate MIRR for each project. Round your answers to two decimal places.
Project A      %
Project B      %

Calculate payback for each project. Round your answers to two decimal places.
Project A       years
Project B       years

Calculate discounted payback for each project. Round your answers to two decimal places.
Project A       years
Project B       years

0 1 2 3 4 5

Explanation / Answer

Solution:

IRR

Project A Year 0 Year 1 to 5 Initial Investment -30,000 Cash Flows 10,000 Present Value of $ 1@ of 14 % from 1 to 5 years 1 3.431 Present Value of cashflows 34310 NPV = Present Value of Cashflows - Initial Investment 4,310 Project B Year 0 Year 1 to 5 Initial Investment -90,000 Cash Flows 28,000 Present Value of $ 1@ of 14 % from 1 to 5 years 1 3.431 Present Value of cashflows                       96,068 NPV = Present Value of Cashflows - Initial Investment 6,068

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