Project A and Project B have a cost of $24,000,000 today. Project A will have cash flows of $10,000,000 per year for three years, while Project B will have cash flows of $15,000,000 the first year, $10,000,000 the second year, and $7,000,000 the third year.
Calculate the NPV and the IRR for Project A using a 12% cost of capital and show your work by using TWO of the following methods: (1) using the formula, (2) identifying all variables using the calculatorâs function keys, (3) using the steps on the calculator to calculate NPV and IRR. Note it is an annuity since the cash flows are the same.
Calculate the NPV and the IRR for Project B using a 12% cost of capital and show your work by using TWO of the following methods: (1) using the formula, (2) identifying all variables using the calculatorâs function keys, (3) using the steps on the calculator to calculate NPV and IRR. Note this project has different cash flows.
Should A, B, both A and B, or neither be accepted if the projects are independent. Circle your choice.
Should A, B, both A and B, or neither be accepted if the projects are mutually exclusive. Circle your choice
Project A and Project B have a cost of $24,000,000 today. Project A will have cash flows of $10,000,000 per year for three years, while Project B will have cash flows of $15,000,000 the first year, $10,000,000 the second year, and $7,000,000 the third year.
Calculate the NPV and the IRR for Project A using a 12% cost of capital and show your work by using TWO of the following methods: (1) using the formula, (2) identifying all variables using the calculatorâs function keys, (3) using the steps on the calculator to calculate NPV and IRR. Note it is an annuity since the cash flows are the same.
Calculate the NPV and the IRR for Project B using a 12% cost of capital and show your work by using TWO of the following methods: (1) using the formula, (2) identifying all variables using the calculatorâs function keys, (3) using the steps on the calculator to calculate NPV and IRR. Note this project has different cash flows.
Should A, B, both A and B, or neither be accepted if the projects are independent. Circle your choice.
Should A, B, both A and B, or neither be accepted if the projects are mutually exclusive. Circle your choice
Related questions
A firm with a 8 percent WACC is evaluating two projects for this yearsâ capital budget. After-tax cash flows (in dollar), including depreciation, are as follows:
| YEAR | Project A ($) | Project B($) |
| 0 | -30,000,000 | -30,000,000 |
| 1 | 4,000,000 | 18,000,000 |
| 2 | 10,000,000 | 10,000,000 |
| 3 | 15,000,000 | 8,000,000 |
| 4 | 20,000,000 | 6,000,000 |
a. Describe the definition of NPV, IRR, and Payback period.
b. Calculate NPV, IRR, and Payback Period for each project.
c. Explain the numbers you obtain from the computations in part (b)
d. If this analysis is to evaluate independent projects, which project(s) should be recommended? Explain.
e. If this analysis is to evaluate mutually exclusive projects, which project should be recommended? Explain.
