Question: 11-6 NPV Your division is considering two projects with the following cash flows (in millions): a. What are the projects NPVs assuming the WACC is

11-6 NPV Your division is considering two projects with the following cash flows (in millions):

11-6 NPV Your division is considering two projects with the following cash a. What are the projects NPVs assuming the WACC is 5%? 10%? 15%?

ANSWER b. What are the projects IRRs at each of these WACCs?

ANSWER c. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? What if the WACC was 10%? 15%? (Hint: The crossover rate is 7.81%.)

ANSWER

Project A Project B 0 H -$25 - $20 $5 $10 $10 $9 $17 $6

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