A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:

0

1

2

3

4

5

Project M	-$21,000	$7,000	$7,000	$7,000	$7,000	$7,000
Project N	-$63,000	$19,600	$19,600	$19,600	$19,600	$19,600

1. Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations. Project M ____ $ Project N ____ $

   Calculate IRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations. Project M ____ % Project N ____ %

   Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations. Project M _____ % Project N _____ %

   Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations. Project M ____ years Project N ____ years

   Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations. Project M ____ years Project N ____ years

A. Assuming the projects are independent, which one(s) would you recommend?

-Both projects would be accepted since both of their NPV's are positive

-Only Project M would be accepted because IRR(M) > IRR(N)

-Both projects would be rejected since both of their NPV's are negative

-Only Project M would be accepted because NPV(M) > NPV(N)

-Only Project N would be accepted because NPV(N) > NPV(M)

B. If the projects are mutually exclusive, which would you recommend?

-If the projects are mutually exclusive, the project with the shortest Payback Period is chosen. Accept Project M

-If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project N

-If the projects are mutually exclusive, the project with the highest positive NPV is chosen. Accept Project N

-If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project M

-If the projects are mutually exclusive, the project with the highest positive MIRR is chosen. Accept Project M

C. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?

-The conflict between NPV and IRR occurs due to the difference in the size of the projects.

-The conflict between NPV and IRR is due to the relatively high discount rate.

-The conflict between NPV and IRR is due to the fact that the cash flows are in the form of an annuity.

-The conflict between NPV and IRR is due to the difference in the timing of the cash flows.

-There is no conflict between NPV and IRR