Question: Hensley Corporation is considering two mutually exclusive projects, Project A and Project B. The manager wants you to tell her which one of the projects
Hensley Corporation is considering two mutually exclusive projects, Project A and Project B. The manager wants you to tell her which one of the projects to select. The cash flows are as follows: WACC-> 10% Year 2 Year 3 Year 4 Year 5 Project A (50,000.00) 15000 15000 15000 15000 31327.67 Project B (60,000.00) 20000 20000 20000 20000 21907.27 Year 0 Boom 1. Using a WACC of 10%, calculate the NPV for both projects [20 Marks] Use the following templates and insert the NPV you calculated in 1 above for Project A and Project B. Note that the NPVs for the BOOM scenario for Project A and Project B are different. Average Bust Year 1 Project A Probability 0.25 0.5 0.25 NPV 20,000 Insert Project A NPV -2000 Boom Average Bust Project B Probability NPV 0.25 0.5 0.25 25,000 Insert Project B NPV -2000 2. Calculate the Expected/Anticipated NPV for Project A and Project B [20 Marks] 3. Calculate the Standard Deviation and Coefficient of Variation for Project A and Project B [50 Marks] 4. Which project would you recommend? [10 Marks]
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