XYZ Corp. is considering two mutually exclusive investments whose expected net cash flows are as follows:
EXPECTED NET CASH FLOWS
Year
Project A
Project B
0
-$290
-$400
1
-387
134
2
-193
134
3
-100
134
4
600
134
5
600
134
6
850
134
7
-180
134
A) Calculate the two projects' NPVs, if you were told that each project's cost of capital was 14%. Round your answers to the nearest cent.
B) Calculate the two projects' NPVs, if the cost of capital was 17%. Round your answers to the nearest cent.
XYZ Corp. is considering two mutually exclusive investments whose expected net cash flows are as follows:
| EXPECTED NET CASH FLOWS | ||
| Year | Project A | Project B |
| 0 | -$290 | -$400 |
| 1 | -387 | 134 |
| 2 | -193 | 134 |
| 3 | -100 | 134 |
| 4 | 600 | 134 |
| 5 | 600 | 134 |
| 6 | 850 | 134 |
| 7 | -180 | 134 |
A) Calculate the two projects' NPVs, if you were told that each project's cost of capital was 14%. Round your answers to the nearest cent.
B) Calculate the two projects' NPVs, if the cost of capital was 17%. Round your answers to the nearest cent.
Related questions
Acorn Co is looking at two mutually exclusive investments. The cash flow details of each Project are shown in the following table.
| Expected Net Cash Flow | ||
| Year | Project A | Project B |
| 0 | (300) | (405) |
| 1 | (387) | 134 |
| 2 | (193) | 135 |
| 3 | (100) | 136 |
| 4 | 600 | 134 |
| 5 | 600 | 135 |
| 6 | 850 | 136 |
| 7 | (180) | 0 |
Acorn has a cost of capital of 7.5%. Should they select project A or B? Why?
If the Hurdle rate for Project B is 17.5%, would this make any difference in Acorn Co
Capital budgeting criteria
A company has a 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
| 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| Project A | -$300 | -$387 | -$193 | -$100 | $600 | $600 | $850 | -$180 |
| Project B | -$400 | $135 | $135 | $135 | $135 | $135 | $135 | $0 |
a)What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
Project A $
Project B $
b) What is each project's IRR? Round your answer to two decimal places.
Project A
Project B
c) 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. Do not round your intermediate calculations.
Project A
Project B
e) Construct NPV profiles for Projects A and B. Round your answers to the nearest cent. Do not round your intermediate calculations. Negative value should be indicated by a minus sign.
| Discount Rate | NPV Project A | NPV Project B |
| 0% | $ | $ |
| 5 | $ | $ |
| 10 | $ | $ |
| 12 | $ | $ |
| 15 | $ | $ |
| 18.1 | $ | $ |
| 24.83 | $ | $ |
F) Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.
G) What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations.
Project A
Project B
