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You are considering an investment in two projects, A and B. Both projects will cost $115,000,...

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Finance

You are considering an investment in two projects, A and B. Bothprojects will cost $115,000, and the projected cash flows are asfollows:

YEAR PROJECT A PROJECT B

1 $7,188    $51,750

2 $21,562    $38,812

3 $40,250    $28,750

4 $50,315    $21,563

5    $57,500 $14,375

Using Excel and show formulas

a. Assuming that the WACC is 9.4%, calculate the payback period,discounted payback period, NPV, PI, IRR, and MIRR. If the projectsare mutually exclusive, which project should be selected?

b. Create an NPV profile chart for projects A and B. What is theexact crossover rate for these two projects?

Answer & Explanation Solved by verified expert
3.7 Ratings (469 Votes)
a The answers arePaybackDiscounted paybackNPVPIIRRMIRRProject A391467121457211112501162Project B285388109167510913951140CalculationsPaybackYearAs cash flowCumulative cash flow of ABs cash flowCumulative cash flow of B01150000011500000115000001150000017188001078120051750006325000221562008625000388120024438003402500046000002875000431200450315004315002156300557500001437500As payback 34600050315 391 yearsBs payback 22443828750 285 yearsDiscounted paybackYearAs cash flow1rPVIFAsdiscounted cash flowCumulative    See Answer
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Transcribed Image Text

You are considering an investment in two projects, A and B. Bothprojects will cost $115,000, and the projected cash flows are asfollows:YEAR PROJECT A PROJECT B1 $7,188    $51,7502 $21,562    $38,8123 $40,250    $28,7504 $50,315    $21,5635    $57,500 $14,375Using Excel and show formulasa. Assuming that the WACC is 9.4%, calculate the payback period,discounted payback period, NPV, PI, IRR, and MIRR. If the projectsare mutually exclusive, which project should be selected?b. Create an NPV profile chart for projects A and B. What is theexact crossover rate for these two projects?

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