Your division is considering two investment projects, each of which requires anup-front expenditure of $25 million. You estimate that the cost of capital is 10% andthat the investments will produce the following after-tax cash flows (in millions of dollars):
Year Project A Project B
1 5 20
2 10 10
3 15 8
4 20 6
a. What is the regular payback period for each of the projects?
b. What is the discounted payback period for each of the projects?
c. If the two projects are independent and the cost of capital is 10%, which project orprojects should the firm undertake?
d. If the two projects are mutually exclusive and the cost of capital is 5%, which projectshould the firm undertake?
e. If the two projects are mutually exclusive and the cost of capital is 15%, which projectshould the firm undertake?
f. What is the crossover rate?
g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?
Your division is considering two investment projects, each of which requires anup-front expenditure of $25 million. You estimate that the cost of capital is 10% andthat the investments will produce the following after-tax cash flows (in millions of dollars):
Year Project A Project B
1 5 20
2 10 10
3 15 8
4 20 6
a. What is the regular payback period for each of the projects?
b. What is the discounted payback period for each of the projects?
c. If the two projects are independent and the cost of capital is 10%, which project orprojects should the firm undertake?
d. If the two projects are mutually exclusive and the cost of capital is 5%, which projectshould the firm undertake?
e. If the two projects are mutually exclusive and the cost of capital is 15%, which projectshould the firm undertake?
f. What is the crossover rate?
g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?
Related questions
Your division is considering two investment projects, each of which requires an up-front expenditure of $24 million. You estimate that the cost of capital is 9% and that the investments will produce the following after-tax cash flows (in millions of dollars):
(10 points)
| Year | Project A | Project B |
| 1 | 5 | 20 |
| 2 | 10 | 10 |
| 3 | 15 | 8 |
| 4 | 20 | 6 |
What is the regular payback period for each of the projects? Round your answers to two decimal places.
Project A years
Project B years
What is the discounted payback period for each of the projects? Round your answers to two decimal places.
Project A years
Project B years
If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?
If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?
If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
What is the crossover rate? Round your answer to two decimal places.
%
If the cost of capital is 10%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.
Project A %
Project B %
Your division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 8% and that the investments will produce the following after-tax cash flows (in millions of dollars):
(10 points)
| Year | Project A | Project B |
| 1 | 5 | 20 |
| 2 | 10 | 10 |
| 3 | 15 | 8 |
| 4 | 20 | 6 |
What is the regular payback period for each of the projects? Round your answers to two decimal places.
Project A years
Project B years
What is the discounted payback period for each of the projects? Round your answers to two decimal places.
Project A years
Project B years
If the two projects are independent and the cost of capital is 8%, which project or projects should the firm undertake?
Project A
Project B
Both projects
If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?
-Project A
Project B
If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
Project A
Project B
What is the crossover rate? Round your answer to two decimal places.
%
If the cost of capital is 8%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.
Project A %
Project B %
Payback, NPV, and MIRR
Your division is considering two investment projects, each of which requires an up-front expenditure of $22 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars):
| Year | Project A | Project B |
| 1 | 5 | 20 |
| 2 | 10 | 10 |
| 3 | 15 | 8 |
| 4 | 20 | 6 |
A. What is the regular payback period for each of the projects? Round your answers to two decimal places.
Project A ____ years
Project B ____ years
B. What is the discounted payback period for each of the projects? Round your answers to two decimal places.
Project A _____ years
Project B _____ years
C If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?
-Select-Project A Project B Both projects
D If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?
-Select- Project A Project B
E If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
-Select-Project A Project B
F. What is the crossover rate? Round your answer to two decimal places.
____ %
G. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.
Project A _____ %
Project B _____ %
