*PLEASE SHOW FORMULAS*

42 43 b. Find each projects's NPV profiles for the two projects. Identify each projects' IRRs and approximate cross-over point. 44 Explain the significance of the cross-over points. For instance, is it better to switch from one 45 project to another, just because the WACC changed? 46 Project A Project B 47 48 0.00% Explain: 49 2.00% 50 4.00% 51 6.00% 52 8.00% 53 10.00% 54 12.00% 55 14.00% 56 16.00% 57 18.00% 58 20.00% 59 22.00% 60 24.00% 61 26.00% 62 28.00% 63 B H 1 Your division is considering two projects. Its WACC is 12%, and the projects' after-tax cash flows (in millions 2 of dollars) would be as follows: 3 4 Expected net cash flows 5 Time Project A Project B 6 0 ($40) (540) 7 1 $10 $25 8 2 $15 $15 9 3 $20 $13 10 4 $25 $11 11 12 You need to find the NPV, IRR, MIRR, Discounted Payback and NPV profile in this question. 13 14 a. Calculate the projects' NPVs, IRRS, MIRRs, and discounted paybacks. 15 WACC = 12% 16 NPVA- $11.01 17 NPVB = $10.52 18 19 20 IRRA 22.66% 21 IRRE 26.25% 22 23 Reinvestment rate is 8%. 24 MIRRA 17.67% 25 MIRRB 16.64% 26 27 Project 4 28 Time period: 0 1 2 3 4 29 Cash flow: (40.00) 10.00 15.00 20.00 25.00 30 PV cash flow: (40.00) 8.93 11.96 14.24 15.89 31 Disc cumul cash flow: (40.00) (31.07) (19.11) (4.88) 11.01 32 33 Payback: 2.69 34 35 Project B Time period: 0 1 2 3 4 37 Cash flow: (40.00) 25.00 15.00 13.00 11.00 38 PV cash flow: (40.00) 22.32 11.96 9.25 6.99 39 Disc cumul cash flow: (40.00) (17.68) (5.72) 3.53 10.52 40 41 Paybackg: 1.52 36 19 42