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 A -$21,000 $7,000 $7,000 $7,000 $7,000 $7,000

Project B -$63,000 $19,600 $19,600 $19,600 $19,600 $19,600

Calculate NPV for each project. Round your answers to the nearest cent.

Project A $____ Project B $____

Calculate IRR for each project. Round your answers to two decimal places.

Project A____ % Project B %____

Calculate MIRR for each project. Round your answers to two decimal places.

Project A ____% Project B ____%

Calculate payback for each project. Round your answers to two decimal places.

Project A ____years Project B ____years

Calculate discounted payback for each project. Round your answers to two decimal places.

Project A ____years Project B ____years

b. Assuming the projects are independent, which one or ones would you recommend? (pick one)

-only project A would be accepted because IRR (A) > IRR (B)

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

-only project A would be accepted because NPV (A) > NPV (B)

-only project B would be accepted because NPV (B) > NPV (A)

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

c. If the projects are mutually exclusive, which would you recommend? (pick one)

-if the projects are mutually exclusive, the project with the highest postive IRR is chosen. Accept project B.

-if the projects are mutually exclusive, the project with the highest postive NPV is chosen. Accept project B.

-if the projects are mutually exclusive, the project with the highest postive IRR is chosen. Accept project A.

-if the projects are mutually exclusive, the project with the highest positive MIRR is chosen. Accept project A.

-if the projects are mutually exclusive, the project with the shortest payback period is chosen. Accept project A.

d. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR? (pick one)

-There is no 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.