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Your division is considering two projects. Its WACC is 10%, and the projects’ after-tax cash flows...

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Finance

Your division is considering two projects. Its WACC is 10%, andthe projects’ after-tax cash flows (in millions of dollars) wouldbe as follows:

Time01234
Project A-$30$5$10$15$20
Project B-$30$20$10$8$6

a) Calculate the projects’ NPVs, IRRs, MIRRs, regular paybacks,and discounted paybacks.

b) If the two projects are independent, which project(s) shouldbe chosen?

c) If the two projects are mutually exclusive and the WACC is10%, which project(s) should be chosen?

d) Is it possible for conflicts to exist between the NPV and theIRR when independent projects are being evaluated? Explain youranswer.

Answer & Explanation Solved by verified expert
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As per rules I am answering the first 4 subparts of thequestionThe Cash    See Answer
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Your division is considering two projects. Its WACC is 10%, andthe projects’ after-tax cash flows (in millions of dollars) wouldbe as follows:Time01234Project A-$30$5$10$15$20Project B-$30$20$10$8$6a) Calculate the projects’ NPVs, IRRs, MIRRs, regular paybacks,and discounted paybacks.b) If the two projects are independent, which project(s) shouldbe chosen?c) If the two projects are mutually exclusive and the WACC is10%, which project(s) should be chosen?d) Is it possible for conflicts to exist between the NPV and theIRR when independent projects are being evaluated? Explain youranswer.

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