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Please show your work on excel and show to commands you used. Thanks! Garage,...

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Accounting

Please show your work on excel and show to commands you used. Thanks!

  1. Garage, Inc., has identified the following two mutually exclusive projects:

Year

Cash Flow (A)

Cash Flow (B)

0

$43,500

$43,500

1

21,400

6,400

2

18,500

14,700

3

13,800

22,800

4

7,600

25,200

  • What is the IRR for each of these projects? Using the IRR decision rule, which project should the company accept? Is this decision necessarily correct?
  • If the required return is 11 percent, what is the NPV for each of these projects? Which project will the company choose if it applies the NPV decision rule?
  • Plot the NPV profile. Over what range of discount rates would the company choose project A? Project B? At what discount rate would the company be indifferent between these two projects? (Hint: Use crossover rate).

  1. Light Sweet Petroleum, Inc, is trying to evaluate a generation project with the following cash flows:

Year

Cash Flow

0

$45,000,000

1

71,000,000

2

15,000,000

If the company requires a return of 12 percent on its investments, what is the MIRR?

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