Your division is considering two investment projects, each of which requires an up-front expenditure of $28...

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Finance

Your division is considering two investment projects, each ofwhich requires an up-front expenditure of $28 million. You estimatethat the cost of capital is 11% and that the investments willproduce the following after-tax cash flows (in millions ofdollars):
Year
Project A
Project B
1
6
18
2
10
12
3
15
8
4
22
5
What is the regular payback period for each of the projects?Round your answers to two decimal places.
What is the NPV and IRR for each of the projects? Round youranswers to two decimal places.
If the two projects are independent and the cost of capital is11%, which project or projects should the firm undertake?
What is the crossover rate? Round your answer to two decimalplaces.
If the two projects are mutually exclusive and the cost ofcapital is 5%, which project should the firm undertake?
If the cost of capital is 11%, what is the MIRR of eachproject? Round your answers to two decimal places.

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4.0 Ratings (691 Votes)

a Payback for the two projects are Year A cumulative cash flows of A B cumulative cash flows of B 0 2800 2800 2800 2800 1 600 2200 1800 1000 2 1000 1200 1200 200 3 1500 300 800 4 2200 500 Thus payback of A 2 1215 280 years Payback of B 1 1012 183 years b NPV Year A 1r PVIF PV of As cash flow B PV of Bs cash flow 0 2800 111 100000 2800 2800 2800 1 600 See Answer

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