Payback, NPV, and MIRR Your division is considering two investment projects, each of which requires an...
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Payback, NPV, and MIRR Your division is considering two investment projects, each of which requires an up-front expenditure of $27 million. You estimate that the cost of capital is 12% and that the investments will produce the following after-tax cash flows (in millions of dollars): Year Project A Project B 1 5 20 2 10 10 3 15 4 20 8 6 a. What is the regular payback period for each of the projects? Round your answers to two decimal places. Project A: Project B: years years b. What is the discounted payback period for each of the projects? Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: years years c. If the two projects are independent and the cost of capital is 12%, which project or projects should the firm undertake? The firm should undertake -Select- d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? The firm should undertake -Select- e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake? The firm should undertake -Select- f. What is the crossover rate? Round your answer to two decimal places. % g. If the cost of capital is 12%, what is the modified IRR (MIRR) of each project? Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: % % Payback, NPV, and MIRR Your division is considering two investment projects, each of which requires an up-front expenditure of $27 million. You estimate that the cost of capital is 12% and that the investments will produce the following after-tax cash flows (in millions of dollars): Year Project A Project B 1 5 20 2 10 10 3 15 4 20 8 6 a. What is the regular payback period for each of the projects? Round your answers to two decimal places. Project A: Project B: years years b. What is the discounted payback period for each of the projects? Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: years years c. If the two projects are independent and the cost of capital is 12%, which project or projects should the firm undertake? The firm should undertake -Select- d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? The firm should undertake -Select- e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake? The firm should undertake -Select- f. What is the crossover rate? Round your answer to two decimal places. % g. If the cost of capital is 12%, what is the modified IRR (MIRR) of each project? Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: % %
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To calculate the payback period discounted payback period net present value NPV modified internal rate of return MIRR and determine the best investment project based on the cost of capital lets analyz... View the full answer
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
Posted Date:
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