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A company has a 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:

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Project A	-$300	-$387	-$193	-$100	$600	$600	$850	-$180
Project B	-$400	$135	$135	$135	$135	$135	$135	$0

The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

Open spreadsheet

1. What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

   Project A: $ fill in the blank 2

   Project B: $ fill in the blank 3

2. What is each project's IRR? Round your answer to two decimal places.

   Project A: fill in the blank 4%

   Project B: fill in the blank 5%

3. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations.

   Project A: fill in the blank 6%

   Project B: fill in the blank 7%

4. From your answers to parts a-c, which project would be selected?

   _________Project AProject B

   If the WACC was 18%, which project would be selected?

   _________Project AProject B

6. Construct NPV profiles for Projects A and B. Round your answers to the nearest cent. Do not round your intermediate calculations. Negative value should be indicated by a minus sign.

   Discount Rate	NPV Project A	NPV Project B
   0%	$ fill in the blank 10	$ fill in the blank 11
   5	$ fill in the blank 12	$ fill in the blank 13
   10	$ fill in the blank 14	$ fill in the blank 15
   12	$ fill in the blank 16	$ fill in the blank 17
   15	$ fill in the blank 18	$ fill in the blank 19
   18.1	$ fill in the blank 20	$ fill in the blank 21
   24.83	$ fill in the blank 22	$ fill in the blank 23

7. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.

   fill in the blank 24%

8. What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations.

   Project A: fill in the blank 25%

   Project B: fill in the blank 26%

A company has a 11% WACC and is considering two mutually exclusive investments that cannot be repeated) with the following cash flows: 0 1 2 3 4 5 6 7 + + + + Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$400 $135 $135 $135 $135 $135 $135 $0 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. Project A: $ $ 240.64 Project B: $ 171.12 b. What is each project's IRR? Round your answer to two decimal places. Project A: 18.10 % Project B: 24.83 % c. What each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations. Project A: 11.36 % Project B: 10.61 % d. From your answers to parts a-c, which project would be selected? Project A V If the WACC was 18%, which project would be selected? Project B e. Construct NPV profiles for Projects A and B. Round your answers to the nearest cent. Do not round your intermediate calculations. Negative value should be indicated by a minus sign. NPV Project A NPV Project B Discount Rate 0% $ $ 5 $ $ 10 $ $ 12 $ $ 15 $ $ 18.1 $ $ 24.83 $ $ f. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations. % g. What is each project's MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations. Project A: % Project B: % B. D E F G H I J K L 11.00% 0 -$300 1 $387 2 -$193 3 -$100 5 $600 6 $850 7 -$180 $600 -$400 $135 $135 $135 $135 $135 $135 $0 Formulas $240.64 ENPV(B3,D6:J6)+C6 $171.12 =NPV(B3,D8:J8)+C8 18.10% =IRR(C6:J6) 1 Capital budgeting criteria 2 3 WACC 4 5 6 Project A 7 8 Project B 9 10 11 Project NPV Calculations: 12 NPVA 13 14 NPVB 15 16 Project IRR Calculations: 17 IRRA 18 19 IRRE 20 21 Project MIRR Calculations: 22 MIRRA 23 24 Alternatively, MIRRA can be calculated as: 25 26 Project A 27 28 PV of Year 1 Outflow 29 PV of Year 2 Outflow 30 PV of Year 3 Outflow 31 PV of Year 7 Outflow 32 33 34 35 36 Sum of Outflow PVs 37 24.83% =IRR(C8:J8) 11.36% =MIRR(C6:J6,B3,) 0 -$300 1 -$387 2 $193 3 -$100 4 $600 5 $600 6 $850 7 $180 Formulas #N/A #N/A #N/A #N/A Formulas #N/A #N/A #N/A FV of Year 6 Inflow at Year 7 FV of Year 5 Inflow at Year 7 FV of Year 4 Inflow at Year 7 #N/A #N/A Sum of Inflow FVs Formulas N PV PMT FV I/YR = MIRRA 7 $0.00 0 $0.00 #N/A MIRRB 10.61% =MIRR(C8:J8,B3,) Alternatively, MIRR8 can be calculated as: 0 -$400 1 $135 2 $135 3 $135 4 $135 5 $135 6 $135 7 $0 Project B Formulas #N/A #N/A #N/A #N/A #N/A #N/A FV of Year 6 Inflow at Year 7 FV of Year 5 Inflow at Year 7 FV of Year 4 Inflow at Year 7 FV of Year 3 Inflow at Year 7 FV of Year 2 Inflow at Year 7 FV of Year 1 Inflow at Year 7 Sum of Outflow PVs #N/A #N/A Sum of Inflow FVs Formulas N PV PMT FV I/YR = MIRRE 7 $0.00 0 $0.00 #N/A Project Acceptance: WACC Accept 11.00% #N/A WACC NPVA NPVB Accept 18.00% $2.66 $72.18 #N/A NPVA Discount Rates NPVA NPVB NPVB $72.18 $2.66 $2.66 $72.18 0% 5.00% 10.00% 12.00% 15.00% 18.10% 24.83% 0% 5.00% 10.00% 12.00% 15.00% 18.10% 24.83% #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A NPV Profiles 75 NPV Profiles: 76 Discount Rates 77 78 79 80 81 82 83 84 85 86 87 88 $1.20 89 90 $1.00 91 92 $0.80 93 94 $0.60 95 96 $0.40 97 98 $0.20 99 100 $0.00 + 101 0% 5.00% 102 103 104 Calculation of Crossover Rate: 105 106 Project A 107 108 Project B 109 110 Project Delta 111 112 113 Crossover Rate = IRRA 114 10.00% 12.00% 15.00% 18.10% 24.83% 0 -$300 1 -$387 2 -$193 3 -$100 4 $600 5 $600 6 $850 7 -$180 -$400 $135 $135 $135 $135 $135 $135 $0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A 18.00% 115 Project MIRR Calculations at WACC = 18% 116 WACC 117 118 MIRRA 119 MIRRE 120 #N/A #N/A

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