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Payback, NPV, and MIRR Your division is considering two investment projects, each of which requires an up-front...

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Finance

Payback, NPV, and MIRR

Your division is considering two investment projects, each ofwhich requires an up-front expenditure of $23 million. You estimatethat the cost of capital is 9% and that the investments willproduce the following after-tax cash flows (in millions ofdollars):

YearProject AProject B
1520
21010
3158
4206

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 is9%, which project or projects should the firm undertake?
-Select-Project AProject BBoth projectsItem 5

If the two projects are mutually exclusive and the cost ofcapital is 5%, which project should the firm undertake?
-Select-Project AProject BItem 6

If the two projects are mutually exclusive and the cost ofcapital is 15%, which project should the firm undertake?
-Select-Project AProject BItem 7

What is the crossover rate? Round your answer to two decimalplaces.
%

If the cost of capital is 9%, what is the modified IRR (MIRR) ofeach project? Round your answers to two decimal places.

Project A %

Project B %

Answer & Explanation Solved by verified expert
4.2 Ratings (786 Votes)
1 PAYBACK PERIOD PROJECT A Year Cash flow Cumulative cash flow 0 23 23 1 5 18 2 10 8 3 15 7 4 20 27 Payback period 2815 253 years PROJECT B Year Cash flow Cumulative cash flow 0 23 23 1 20 3 2 10 7 3 8 15 4 6 21 Payback period 1310 130 years 2 DISCOUNTED PAYBACK PROJECT A Year Cash flow PVIF at 9 PV at 9 Cumulative PV 0 23 100000 2300 2300 1 5 091743 459 1841 2 10 084168 842 1000 3 15 077218 1158 159 4 20 070843 1417 1576 Discounted Payback period 2101158 286    See Answer
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